Up till now, VAT becomes due when the supply takes place or when the service is completed. However, if (part of) the price is invoiced or received in advance, i.e. before the time of supply or before completion of the service, then VAT becomes due when the invoice is issued or when the payment is received. In such case, VAT becomes due on the invoiced amount or on the amount received.
The time when VAT becomes due is important for several reasons: it determines in which VAT return the VAT amount due needs to be reported, the time when the VAT can be deducted through the VAT return as well as the applicable VAT rate (for example, in case a change occurs to the standard VAT rate).
As from the 1st of January 2013, VAT will still become due when the supply takes place or when the service is completed. However, the issuing of an advanced invoice will no longer make VAT due. Only a payment prior to the time of supply or before completion of the service can make VAT payable as from the 1st of January 2013.
On the one hand, this will have its consequences on the deduction of VAT. A VAT taxpayer who receives an advanced invoice with VAT will be unable to deduct the VAT amount as long as the supply of the goods or the completion of the service has not taken place or as long as the payment is not done (as mentioned earlier, VAT will as from the 1st of January 2013 only become due at that moment).
On the other hand, one might wonder whether a supplier needs to report the VAT amount immediately in its VAT return when issuing an advanced invoice. After all, the issuing of an advanced invoice no longer makes VAT due. One might even question whether it is even allowed at all to issue an invoice before the time of supply or before the payment has been done?
Due to this lack of clarity, many companies were unable to adapt their invoicing processing systems timely in accordance with the aforementioned new rules. A new administrative decision of 19 December 2012 now tries to shed light on this.
In a transitional phase, VAT taxpayers are allowed to continue to apply the old rules during 2013 (i.e. on the one hand, the supplier reports VAT immediately in the VAT return which relates to the period in which the advanced invoice is issued and on the other hand, the customer can immediately deduct the VAT amount without having to await the payment or the time of supply or completion of the service).
Notwithstanding the above, VAT taxpayers will also be entitled to apply the new rules in 2013. This means that suppliers can freely choose to not account for VAT in their VAT return when they ask for an advanced payment, provided that:
- the advance payment is asked by means of a document other than an invoice;
- this document mentions no VAT, no VAT rate and no reason why no VAT is accounted for (e.g. no reference like ‘VAT inclusive’).
If the aforementioned document would mention a VAT amount, then it is considered to be an invoice and consequently, the old rules as set out above are applicable.
Once the payment is received or once the supply of the goods or the completion of the service has taken place, VAT becomes due and the supplier will have to report the VAT amount due in its periodical VAT return. The actual invoice will then have to be issued by the supplier by no later than the fifteenth day of the following month.
The customer will only be able to deduct the VAT amount at the time when it becomes due in the hands of the supplier (that means at the time of the payment or at the time of the supply of the goods or the completion of the service) and provided that he is in the possession of a valid invoice.
The administrative decision of the Belgian VAT authorities does not include a transitional regime for services which are deemed to take place in Belgium following the general business-to-business rule (i.e. place of supply of a service is where the recipient of the service is established) and for which the Belgian established customer needs to account for the Belgian VAT due following the reverse charge mechanism.
Such customer will only be able to include the VAT amount in the VAT return which relates to the period in which the service is provided or in which the payment of the price is done (this is the moment when the VAT becomes due), even if the supplier would issue an advanced invoice a couple of days before that moment in time.
In the course of the first quarter of 2013 a new administrative circular letter is to be expected. This letter will shed light on the final rules regarding the time when VAT becomes due (i.e. as they will apply after the transitional regime, as from the 1st of January 2014). To be continued...