VAT authorities ease the VAT grouping rules
Companies which form a group from an economic, financial and organizational point of view, can establish a VAT group. As a consequence, they will for VAT purposes be considered as one VAT payer and the intra-group transactions will not be subject to VAT. Recently, the VAT authorities eased the conditions for such a VAT group.
Advantages of a VAT group
The main advantage of a VAT group is the fact that the transactions between the members of the VAT group fall outside the scope of VAT. For starters, you will avoid the prefinancing of VAT which should be paid immediately opposed to the same VAT which will be deductible later.
VAT grouping is also used to optimize the VAT deduction when there is an asset management company within the group. When the asset management company rents out immovable property to other members of the group, the rent is VAT exempt (a number of exemptions apply) so there is no right to deduct VAT in the hands of the asset management company with respect to the acquisition of the immovable property.
But in case the asset management company is part of a VAT group, the renting to another member falls outside the scope of VAT. As a consequence, the VAT position of the asset management company is no longer influenced by the renting. It has to be considered whether the VAT group performs other transactions which are subject to VAT. In such case, the VAT paid on the acquisition of the immovable property can be deducted from the VAT paid on other transactions.
VAT grouping: conditions
In order to create a VAT group, a number of conditions have to be met:
you should opt to do so;
there have to be at least 2 members;
all members should be Belgian VAT payers (individuals or legal bodies);
the members should be a) financially, b) organizationally and c) economically closely linked.
The tax authorities consider that there is a close economic link when:
the main activity of each member is of the same nature, or
the activities are ancillary or influence each other, or relate to a joint economical goal, or
the activity of one VAT payer is effectuated in full or partially on behalf of the others.
The VAT authorities required that this situation existed at the time the application for the VAT group was made. This is difficult when you want to establish a company which has to start renting out a building (e.g. because the building is not finished). As from now, the VAT authorities accept the future renting of a building in case at the time of the application for the VAT group the building is still to be constructed. However, you should then be able to provide a notarial deed concerning the immovable rent with the application. Possibly you have to add also an urban plan. Also note that the identification of the VAT group and the commissioning of the building have to take place in the same calendar year.
Additional softening of the rules
The tax authorities eased their position also on other points. The authorities now confirm that a VAT group can be voluntarily terminated within three years after establishment. This was in the past not clear.
In case an existing VAT payer joins a VAT group, the VAT deducted with respect to fixed assets has to be revised. The VAT payer should report this in its last VAT return and repay the amount of VAT.
On the other side, the VAT group can also perform a VAT revision (when the VAT group is a full VAT payer) for the same amount. In the end this is a zero-sum game, but you are still facing the prefinancing. The authorities accept that you compensate both revisions, but you have to obtain permission from the VAT authorities. The authorities clarify that both the amount to be paid as the negative revision should be reported in the VAT return. This was not so clear in the past.
VAT grouping certainly has its advantages. But whether it is suited for your own situation, this should be further examined.