Heavy fines due in Belgium in case of VAT abuse

The recently published cases involved developers who presented transactions as:

• the sale by one group company to buyers, of land and of buildings to be demolished, subject to registration duties rather than VAT; in combination with
• the conclusion of a building agreement between the buyers and another group company, subject to a temporary reduced rate of 6% VAT (demolition and reconstruction regime).

The Belgian tax authorities saw these arrangements as abusive practices and sought to levy the standard rate of 21% VAT on a single supply of off-plan apartments. They moreover applied a fine of 200%, which in one case was later reduced to 20%.

Neither the Belgian Supreme Court(judgment of 29 November 2024), nor the Court of Appeal of Ghent(judgment of 15 October 2024), saw an issue with the level of the fines applied. They pointed to the existence of a provision in Belgian VAT legislation stating that every infringement of the obligation to pay VAT to the State is in principle subject to a 200% fine (reduced to 20% in the absence of bad faith). In line with EU law, this holds irrespective of the fact that Belgian VAT legislation only explicitly refers to the concept of abuse to rule out the recovery of abusively recovered input VAT.

 

Key takeaway

The level of some of the fines applied to abuses in Belgium means that any VAT optimisation schemes need to be carefully analysed upfront by local indirect tax specialists. For schemes already implemented, depending on the circumstances, taxpayers should consider a spontaneous regularisation to obtain penalty protection.

 

Reference

Belgian Supreme Court, 29 November 2024: MyMinfin

Court of Appeal of Ghent, 15 October 2024: MyMinfin