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Re-invoicing expenses: refreshing the rules of play regarding VAT

Friday 22/11/2019
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Now that the most recent change relating to direct taxation in respect of recharging motoring costs is a little way behind us, it can't do any harm to freshen up the rules around the recharging of expenses overall. 

After all, in practice we still see the fiscal rules not being followed all too often when re-invoicing expenses. This can lead to some nasty surprises in the event of a fiscal audit. We will now give a short overview of the basic principles regarding VAT, including some concrete examples as they occur in practice. The basic principles regarding direct taxation can be found in this article.

Re-invoicing expenses – VAT

As regards VAT, there are three possibilities for the recharging of expenses, whereby each one leads to a different VAT arrangement:

  • Recharging expenses in the context of other work: where the re-invoicing relates to costs incurred that are re-invoiced as part of providing a service or supplying goods, this constitutes an element of the price of this service provision or goods supply. Consequently, these expenses form part of the taxable amount for the service or supply provided, and the VAT regulations for the main action will apply (determination of location, rate, payment of VAT, etc.). The principle of subsidiary affairs following main affairs applies here, save for where the work being recharged constitutes “an aim in itself” for the counterparty.
  • For expenses re-invoiced as such: where an entity liable for VAT recharges for expenses they have incurred in their own name, but where this charge does not form part of other work, then the commissioner's fiction applies. This means that, for VAT purposes, the entity liable for VAT is considered to have provided and received the services and supplies to which the expenses being recharged relate. Accordingly, the VAT rules for the underlying work apply to the re-invoicing of these expenses (determination of location, rate, payment of VAT, etc.).
  • We can only speak of amounts advanced where these relate to expenses incurred in the name of one's client and chargeable to them. Here, the entity advancing these expenses can reclaim the amount advanced solely from the counterparty that is the legal or contractual debtor for the sum being recharged.  No VAT is payable on the advances that are charged.

We will now explain these three hypotheses further:

Recharging expenses forming part of the main work

This is the hypothesis that comes up most often in practice.  In this case, we are talking about expenses that are recharged as part of other work that is considered to be the main work. Pursuant to Art. 26, paragraph one of the VAT Code, for the supply of goods or the provision of services, VAT is calculated upon everything that the supplier of the goods or the provider of the service receives in compensation, or is entitled to receive. Accordingly, the additional expenses for which the supplier of the goods or the provider of the service charges are also included in the taxable amount (e.g. costs for transport, consignment and packaging). This rule also applies if the expenses are recharged on a separate invoice.

By way of an example, hotel, restaurant and travel costs that a Belgian consultant recharges to their Belgian client, on top of the actual compensation for the ‘consultancy work’, will be subject to VAT in Belgium. The ‘expenses recharged’ contributed to the performance of the consultancy service and follow the same VAT regime, whether this involved a hotel, a restaurant or a taxi journey abroad.

Expenses recharged as such

In this hypothesis, solely an expense is recharged, without this recharge forming part of other work that is carried out between the same parties.

As a result of the commissioner's fiction (Art. 13, § 2 and 20, § 1 of the VAT Code), the party in receipt of the recharge is deemed to have carried out the underlying action themselves. Consequently, for this category of re-invoicing, the location of each supply or service should always be determined, along with the rate and thereby also the rules for the payment of VAT.


Supplier A /       =>       Intermediary B      =>       Final customer C

Service provider A


The expenses recharged by B are not in connection with a service provision or the supply of goods in the relationship between B and C. B is deemed to have received the service or goods supply from A themselves, and then to provide this to C. In both the A-B relationship and the B-C relationship, the same VAT rules are applied in accordance with the nature of the action.

Amounts advanced

Where amounts advanced are recharged, these do not form part of the taxable amount (Art. 28 5° of the VAT Code). ‘Advances’ refer to the sums advanced by the supplier or service provider for expenses incurred in the name of, and chargeable to, the fellow contracting party.

Whenever these expenses relate to rights, compensation or taxation, they may only be considered an advance if they were paid in advance in the name of the fellow contracting party, who is the legal debtor for them. Conversely, any tax that is itself recharged by the debtor will remain subject to VAT as an element of the price of their work.

Where the sums relate to a supply or service provision that is ordered from a third party by the supplier in the name of their fellow contracting party, and chargeable to them, we can only speak of an ‘amount advanced’ where the price of the supply or service is invoiced to the fellow contracting party by the third party. A typical example of this is an accountancy office that makes a publication in the Belgian Official Gazette by order of a client. The contractual relationship exists solely between the Official Gazette and the client (for whom the publication is made), whereby the accountancy office has merely advanced the amount and paid it to the Official Gazette.

Peculiarities in the context of the right of deduction

The re-invoicing of certain expenses also affects the applicability of particular VAT deduction restrictions. After all, the VAT Code contains a number of restrictions for the deduction of expenses that can also be used for private purposes.

In the context of recharging for such expenses, the question is to whom the deduction restriction or exclusion relating to these expenses should apply: to the entity recharging for the expense, to the entity to whom the expense is recharged, or to both? By way of an example:

  1. Restaurant costs

The VAT on restaurant and hostel costs is not deductible in principle.

Where a company recharges for restaurant costs and these expenses relate to multiple works carried out as a single whole, the VAT on these restaurant costs is not deductible for the company recharging for the restaurant costs. The company to which the (supply/service) work is invoiced will be able to deduct the full amount of VAT. After all, for this company, these recharged expenses involve compensation for a service provided and are not considered to be restaurant costs as such.

Where a company recharges restaurant costs ‘as such’, it may deduct the VAT on restaurant costs as long as it obtains an accompanying invoice for this. The deduction exclusion will then apply to the company to whom the restaurant and hotel costs were recharged as such, provided that:

- The restaurant invoice is made out to the entity liable for VAT that is recharging and
- the restaurant costs being recharged are listed separately on the invoice

  1. Motoring costs

In principle, up to 50% of the VAT on expenses for personal vehicles, dual-use cars and minibuses may be recouped on the basis of Art. 45, §2 of the VAT Code. There is therefore a deduction restriction regarding VAT for such motoring costs.

Motoring costs that are recharged as part of a main body of work will remain deductible by no more than 50% on the part of the entity recharging them. The company being re-invoiced will enjoy the full right of deduction, insofar as a full right of deduction applies to the overall service provision in principle.

Example: a consultant carries out a project by order of a client whereby they also incur motoring costs that are recharged to that client in the form of a fixed rate of compensation per kilometer driven. The deduction restriction will need to be applied on the part of the consultant, regardless of whether these expenses appear on the same invoice as that for the main action or whether the expenses appear separately on a different one.

In the event that the motoring costs are recharged separately from any main action, the 50% deduction restriction will apply both on the part of the entity recharging and on the part of the client to whom the expenses are recharged. However, where an entity makes a car available to a connected company, it will not be subject to the aforementioned deduction restriction as stipulated in Art. 45, §2 of the VAT Code (Decision E.T.113.611 d.d. 07.11.2007), such that the deduction restriction in this specific case will solely need to be applied for the company to which the motoring costs are recharged.


Whenever a company wishes to levy a charge upon a client for certain expenses, it must analyse the manner in which (adding to an invoice, BTW-%, etc.) those costs should be charged in each case. If not, it may well find itself facing some nasty surprises in the event of a fiscal audit.

Contact one of our experts
Bert Derez
Bert Derez
Partner Tax & Legal Services
Marisol T'Kint
Marisol T'Kint
Senior Associate Tax & Legal Services