In the first half of 2012 there have been some interesting developments, notably in connection to the VAT revision period as well as to the VAT-exempt immovable rent. The pace at which these VAT rules evolve requires businesses to be watchful and react accordingly.
As a general rule, taxpayers can immediately deduct the input VAT they incur. However, for investment goods, the VAT legislation allows for a revision period, during which the initial VAT deduction can be revised if the investment goods are no longer to be used for VAT taxable activities. For immovable property, this revision period is 15 years. In the past this 15 year period began on 1 January of the year in which the VAT became due (i.e. at the moment of supply – unless the invoice is issued or the payment is received prior to the supply, in which case the VAT would become due on that earlier point in time).
According to a recent administrative decision, effective from 1 January 2012, the VAT revision period starts on 1 January of the year in which the immovable property is taken into use. In practice, this extends the VAT revision period, in particular in situations where construction and invoicing are spread over several years.
Another important development relates to a Belgian court case on immovable property. Such a transaction is in principle VAT exempt and therefore does not grant any right to deduct input VAT. This is why many VAT taxpayers seek VAT taxable alternatives that enable them to deduct the often large amounts of input VAT they incur in connection to buildings. Since the Temco Europe SA case of the European Court of Justice, it has been generally accepted that the essential object of a VAT exempt immovable rent is the passive manner in which the immovable property is put at the disposal irrespective of the fact that the tenant has an exclusive enjoyment of the immovable property. However, recently the Brussels Court of Appeal leaned towards a more civil law approach, stating that the exclusive enjoyment is an essential element for a VAT-exempt immovable rent.
Regarding the revision period, the new administrative standpoint provides a clear and workable ground rule, although not always beneficial for the taxpayer. In relation to the VAT-exempt immovable rent, the interpretation of the court limits the scope of the exemption and could therefore create opportunities. The practical impact is, however, less clear, certainly given the fact that Belgian VAT authorities have not yet officially reacted to this judgment.