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What does 2021 have in store for you in terms of VAT?

Monday 04/01/2021
2021 BTW

Several major VAT changes were introduced throughout the past decade, and a number of significant developments are on the horizon in 2021.

The UK will no longer be subject to EU rules from 1 January, which has significant consequences for VAT and customs formalities. E-commerce will also have to prepare for major VAT changes mid-2021. There is also some good news, however. A reduction in VAT will temporarily be granted for demolition and reconstruction work

Brexit 

The United Kingdom (UK) has no longer been a member of the European Union from 1 February 2020, a date that has been sometimes overlooked, as the country remained part of the single market and will continue to observe EU rules until 31 December 2020. This transitional regime will expire on 1 January 2021, and the United Kingdom will henceforth effectively be considered a third country territory for both customs formalities and VAT. We would like to provide you with a checklist to enable you to check whether you have taken the necessary steps to ensure that this transition runs smoothly and correctly.

Customs formalities
  • Do you have an EORI number, which you will need if you intend to export goods to or import goods from the UK?
  • Do you know the commodity codes of your products? Please note that an 8-digit commodity code will suffice for Intrastat declarations, but this will go up to 10 digits for customs.
  • Do you know the customs technical origin of your products?
  • Avoid paying import duties twice. For goods that you are shipping from third member states to the UK via Belgium. it will no longer be beneficial to import them into Belgium. It’s advisable to keep these goods under customs supervision in Belgium before importing them into the UK.
  • Depending on what type of business you are in, certain special customs permits can greatly facilitate exports and imports to and from the UK. Have you already looked into this and submitted the necessary applications?
  • Check the Incoterms of your contracts to ensure that you know which party has to export and import the goods.
VAT
  • Have you adapted your accounting programme to ensure that purchases and sales with UK suppliers and customers are no longer considered to be intra-Community?
  • Have you checked whether the change from EU to non-EU country affects the location of your services, the application of certain VAT exemptions or even your entitlement to deductions?
  • Did you incur VAT in the UK in 2020? You can still claim it back until 31 March 2021 via the VAT refund procedure. After that, you will have to observe the paper refund procedure of the 13th Directive.
Northern Ireland: special treatment

Major efforts have been made to avoid a hard border between the Republic of Ireland and Northern Ireland. In the end, Northern Ireland was awarded special VAT and customs status. The country will still be considered EU territory for goods deliveries. VAT payers in Northern Ireland will be allocated a special VAT number with the prefix XI. 

This does not apply to the provision of services, however, and, in this case, Northern Ireland will no longer be considered to be an EU country. Remember to correctly incorporate this amended status into your accounting software if you have customers or suppliers in Northern Ireland.

Demolition and reconstruction temporarily at 6%

If you are buying an old building this year and are planning to demolish it to construct a new property, your timing is spot on. You will be able to do this at a reduced VAT rate of 6% from 1 January 2021 until 31 December 2022.
Read all the details of this interesting temporary arrangement here. 


E-commerce 

Although the new e-commerce legislation was initially going to be introduced from 1 January 2021, it was postponed at European level until 1 July 2021 due to the Covid pandemic. Nevertheless, we would like to take this opportunity to provide you with a brief overview of what Belgian web shops can expect this summer.

One-Stop-Shop

The existing regime for electronic services will be extended to goods. The Mini One-Stop-Shop will be transformed into a fully-fledged One-Stop-Shop (OSS). Businesses will consequently no longer have to register in the member states of their private customers.

Foreign VAT due from €10,000

The current rules on distance selling will expire on 1 January 2021. According to these rules, a check was carried out in each individual country as to whether the threshold for distance selling was exceeded (€35,000 or €100,000, excluding VAT). 
From now on, web shops will have to charge foreign VAT as soon as they exceed the threshold of €10,000 for distance sales and electronic services to private individuals based in other EU member states. As this threshold will easily be reached, many more web shops will have to charge foreign VAT, which will have to be settled via the One-Stop-Shop declaration.

E-commerce was boosted significantly by COVID-19 in 2020. Find out here how some entrepreneurs approached this

We will of course keep you informed of any further developments in terms of VAT. Feel free to contact us.
 

Contact one of our experts

Bert Derez

Bert Derez

Partner Tax & Legal Services

Karolien Vanmeerhaeghe

Karolien Vanmeerhaeghe

Senior Manager Tax & Legal Services