At the beginning of the year, there will be a new simplification: the abolition of the VAT certificate. We would like to explain this topic to you.
Abolition of the VAT certificates
First, let’s briefly outline the situation. The VAT legislation provides for the application of a reduced VAT rate for work on real estate in various situations:
- Real estate work related to a private residence more than 10 or 15 years old;
- Real estate work on a private residence intended for the accommodation of disabled persons;
- Real estate work on housing intended for the accommodation of disabled persons;
The application of the reduced VAT rate is always subject to a number of specific conditions, such as the purpose or use of the property (e.g. private use).
However, it is not always possible for the contractor to verify whether these conditions will be met. That is why VAT legislation used to provide for a reversal of the burden of proof by issuing a ‘VAT certificate’. This meant that the client presented the contractor with a certificate confirming that he met all the conditions of the reduced rate and the contractor was discharged of his liability for the correct application of the VAT rate.
In practice, however, the obligation of the certificate turned out to be an administrative burden. In addition, the VAT certificates were never standardised. Therefore, the legislator has decided to abolish the certificate obligation as of 1 January 2022 and to replace it by an extensive declaration on the invoice itself.
New invoice requirement
The separate certificate will be abolished and you will have to include a new statement on your invoice from now on. The wording of that statement is specific to each reduced rate, but follows the same reasoning.
The client will be deemed to have confirmed the conditions of application of the reduced rate, unless he challenges the invoice within a period of one month. Consequently, the client will be responsible for the possible recovery of VAT if he fails to challenge the invoice.
Let’s take an example. We refer to the declaration for work on real estate in private residences. According to the new legislation, this statement is as follows:
“VAT rate: In the absence of a written dispute within a period of one month from the receipt of the invoice, the client is deemed to acknowledge that (1) the work is performed on a residence of which the first occupation took place in a calendar year that is at least fifteen years prior to the date of the first invoice relating to those works, (2) the residence, after completion of the work, is used exclusively or primarily as a private residence and (3) the work is provided and invoiced to the final consumer. If at least one of these conditions is not met, the standard VAT rate of 21 pct. will apply and the client will be liable for the payment of the tax, interest and fines due in respect of these conditions.”
Transition period
The new measure will enter into force from 1 January 2022 but there is a transitional period. Until 30 June 2022, taxable persons may still use the old VAT certificates to adapt their internal working procedures.
Our Bofidi experts are happy to help you
Do you have specific questions about the abolition of the VAT certificate? Do not hesitate to contact us. Our team of Bofidi experts are happy to help you.