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Belgium: Possible changes for periodic VAT return

Belgium: Possible changes for periodic VAT return

The value added tax (VAT) return has changed very little over the past 25 years. In light of the VAT package in 2010, questions are now being asked concerning whether the current method of VAT reporting is obsolete or at least in need of a revision or “facelift.”

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Background

The VAT return and the related reporting—more specifically the periodic intra-Community recapitulative statement and the annual sales listing—are a source of information for the VAT administration. This information is used to verify the accuracy of the VAT paid and thus limit the loss of VAT revenue for the government.

The VAT administration uses this information to conduct targeted checks, with most VAT audits being a result of “data mining” of VAT returns and related reports. This is a technological process that requires little human intervention and makes it possible to detect anomalies, including fraud, more quickly. Although more targeted checks are carried out and anomalies are detected more quickly, data mining starts with “historical transactions.”

The VAT return is no more than a consolidated reporting of transactions that have taken place in the “recent” past. In a study by the European Commission, the VAT loss (also known as the VAT gap) in Belgium is estimated for 2018 to be 10.4% of the expected VAT revenue.

The loss of VAT revenue and the fraud sensitivity of the VAT system cannot be solved by merely giving the VAT return a thorough facelift (for example, by adding more reporting grids). Even then, the VAT administration will continue to lag behind the facts to some extent, and the data mining system will remain limited to the detection of historical anomalies.


Real-time reporting

A real-time reporting system means that relevant documentation is shared with the VAT authorities in real-time.

For example, in Spain, certain categories of taxpayers are already required to report their transactions in "real-time" (so-called SAF-T reports, based on OECD principles). In return, these taxable persons receive certain advantages, such as additional deferrals in submitting their periodic VAT returns and nonapplication of certain VAT reporting obligations. As a result, the Spanish tax administration is able to react more rapidly in detecting and addressing certain anomalies, including fraud. This type of “real-time” system usually concerns invoice details, but can also apply to other tax-relevant documentation. In the longer term, this may also render the current VAT return system superfluous.

The introduction, over time, of a "real-time" system in Belgium would need to be viewed in light of global trends in this area. This would require far-reaching digitalization on the part of both the VAT taxpayer and the VAT administration, although the Belgian tax authorities have already gained some experience in this field with the “tax-on-web” platform that is already being used by millions of taxpayers for filing their individual (personal) income tax returns. In any event, tax professionals do not expect the implementation of a real-time VAT reporting system in Belgium in the near future.

A "real-time" reporting system may offer significant benefits for taxpayers if properly implemented. For instance, as a result of this "real time" reporting:

  • What if the monthly VAT and Intrastat reporting were no longer required?
  • What if the relationship with the VAT administration was transformed from a controlling and penalizing relationship to a real cooperative relationship?
  • What if VAT fraud was really being addressed so that the "additional revenue” were being used for other fiscal incentives that benefit bona fide parties?

Read a November 2020 report prepared by the KPMG member firm in Belgium

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