In our Tax Newsletter of November 2014 we explained that the Minister of Finance decided to abolish the favourable regime whereby legal entities serving as directors or liquidators could choose whether or not to subject themselves to VAT for the services they rendered. Starting 1 January 2015 these types of legal entities would be treated as taxable persons and they would necessarily have to comply with all VAT formalities (registration as a taxable person, invoicing, filing of VAT returns, etc.), and most importantly, they would have to charge VAT on the services they supply.
Because there was very little time between the announcement of this new position and its entry into force the Minister of Finance initially decided to postpone the entry into force until 1 January 2016. This date has now been further postponed until 1 April 2016. This should give taxpayers more time to better prepare themselves, taking into account that the VAT administration is working on a Circular Letter which should be published within a few weeks from now.
Companies that are not entitled to a full deduction of VAT (e.g., financial institutions, investment companies, hospitals, etc.) will see the cost of their directors' services increased by the non-deductible VAT. Please note that apart from appointing individuals (who are not subject to VAT when serving as directors or liquidators) instead of legal entities, some other solutions may be available to deal with the cost of this non-deductible VAT. A temporary solution may lie in the invoicing and/or paying of an advance on the directors' fees before 1 April 2016. More structural solutions may consist of the following: depending on the circumstances, parties could consider setting up a VAT group, certain services may benefit from specific exemptions such as the exemption for services rendered to certain Belgian investment companies or the exemption for small enterprises (which is expected to be increased to 25,000 euro p.a.). Please contact your tax advisors for the proper implementation of the above and for guidance on your company's specific situation.