From January 1, 2023, invoices for real estate work involving VAT reverse charge in Belgium must include a new mandatory and more detailed mention than the former "co-contractor" one. This new mention aims to inform customers about their tax obligations and avoid non-compliance situations.
What is VAT reverse charge?
The VAT reverse charge mechanism (called "autoliquidation" in French) is a tax procedure whereby the obligation to declare and pay VAT is transferred from the supplier to the customer. In practice, instead of the service provider charging VAT and remitting it to the state, it is the customer who declares the VAT in their own periodic VAT return. The supplier therefore issues an invoice without VAT, but with the mandatory mention indicating that the reverse charge regime applies.
This mechanism was designed to combat VAT fraud, particularly in high-risk sectors such as construction. It ensures that VAT is effectively declared and paid by placing this responsibility directly in the hands of the invoice recipient, who is generally a taxable person required to file periodic VAT returns.
The new mandatory mention since 2023
Until December 31, 2022, it was sufficient to include the mention "Reverse charge" or "VAT due by the co-contractor" on the invoice. Since January 1, 2023, this simplified mention is no longer sufficient. The new mandatory mention is as follows:
"Reverse charge: In the absence of written objection within one month of receipt of the invoice, the customer is presumed to acknowledge that they are a taxable person required to file periodic VAT returns. If this condition is not met, the customer shall bear responsibility for the payment of the tax, interest and penalties due."
This mention must appear clearly and legibly on each relevant invoice. The legislator's objective is to ensure that the end customer fully understands their VAT obligations and the consequences of any failure to comply. In the absence of written objection within the one-month period, the service provider is discharged of responsibility regarding the customer's status as a taxable person, except in cases of collusion between parties.
Which situations require this mention?
Real estate work (Article 20 of Royal Decree No. 1)
The most common situation concerns real estate work. When an entrepreneur established in Belgium carries out real estate work for a customer who is themselves a VAT-registered taxable person filing periodic returns, the reverse charge regime applies. Real estate work covers a wide range of activities:
- Construction, conversion and renovation of buildings
- Demolition work
- Plumbing, electrical, heating and air conditioning work
- Painting, glazing and floor/wall covering work
- Installation of elevators and security systems
- Earthwork and road construction
- Installation of fences, gates and exterior developments connected to a building
Intra-Community services (Article 21, §2 of the VAT Code)
The reverse charge also applies to services provided between taxable persons located in different EU Member States. When a service provider established in another EU country supplies a service to a Belgian taxable person, the latter must self-assess Belgian VAT on that service. In this case, the mention to be included on the invoice remains the one provided for by the general rules on intra-Community services, namely the reference to Article 21, §2 of the VAT Code or Article 44 of Directive 2006/112/EC.
Supplies with assembly or installation
When a foreign supplier delivers goods to Belgium and carries out their assembly or installation, the Belgian taxable customer is required to self-assess the VAT. This case frequently arises in the context of deliveries of industrial machinery, technical equipment or built-in furniture.
Construction sector: subcontracting
In the construction sector, subcontracting is particularly affected by the reverse charge regime. When a subcontractor invoices a main contractor for real estate work, and that main contractor is a VAT-registered taxable person filing periodic returns, the reverse charge applies. This subcontracting chain can involve several levels, and the regime applies to each link in the chain.
Legal basis and regulatory text
Under Article 20 of Royal Decree No. 1, the co-contractor of the entrepreneur established in Belgium who carries out real estate work is required to pay the tax due as a result of this activity if they are themselves a taxable person established in Belgium (or if they are not established in Belgium, but have appointed a responsible representative) and are required to file periodic VAT returns.
The amendment was introduced by the Royal Decree of 26/10/2022 modifying Royal Decrees Nos. 1, 2, 3, 4, 10, 19, 22 and 59 regarding value added tax (Belgian Official Gazette of November 10, 2022). This Royal Decree now requires a more explicit mention in order to strengthen transparency and accountability of the parties involved in transactions subject to reverse charge.
Practical examples
Example 1: Construction entrepreneur
An electrician (Belgian VAT-registered taxable person) carries out electrical installation work in a warehouse belonging to a logistics company (Belgian VAT-registered taxable person filing periodic returns). The electrician must issue their invoice without VAT and include the complete reverse charge mention. The logistics company will report the tax base in box 87, the VAT due in box 56, and the deductible VAT in box 59 of its periodic return.
Example 2: Subcontracting in construction
A mason subcontracts part of their structural work to another entrepreneur. Both parties are VAT-registered taxable persons filing periodic returns. The subcontractor invoices the main contractor without VAT, with the mandatory reverse charge mention. The main contractor includes this VAT in their periodic return.
Example 3: Work for a private individual
A painter carries out painting work in the private home of an individual. Even if that individual holds a VAT number for a secondary activity, if they do not file periodic VAT returns, the reverse charge regime does not apply. The painter must charge VAT normally (at 6% if the building is more than 10 years old, or at 21% in other cases).
Example 4: Intra-Community service
A French IT consultant provides software development services to a Belgian VAT-registered company. The French consultant invoices without VAT with the mention of Article 21, §2 of the VAT Code. The Belgian company self-assesses Belgian VAT at 21% in its periodic return.
Customer obligations
It is important to note that the customer must inform the entrepreneur if they are not required to file periodic VAT returns at the time they communicate their VAT number to the entrepreneur. If this condition is not met, the customer may be held responsible for the payment of tax, interest and penalties due.
A customer receiving an invoice with reverse charge must:
- Report the tax base in box 87 of their periodic return, the VAT due in box 56, and the deductible VAT in box 59
- Retain the invoice as supporting documentation for the legal retention period (7 years in Belgium)
- Ensure that the reverse charge is correctly recorded in their accounting books
- Verify that the service provider is indeed a VAT-registered taxable person by consulting the European Commission's VIES database
Consequences of non-compliance
Failure to include the mandatory reverse charge mention on invoices can result in significant consequences for businesses, both for the supplier and the customer:
- Administrative fines: The Belgian tax administration can impose fines ranging from EUR 50 to EUR 5,000 per infringement identified, depending on the severity and repetitive nature of the violation.
- Refusal of VAT deduction: If the mandatory mention does not appear on the invoice, the administration may refuse the customer's right to deduct the self-assessed VAT, representing an additional cost of 21% on the invoice amount.
- Late payment interest: In the event of VAT not declared or declared late, late payment interest is applied to the amounts due. Since January 1, 2023, the rate is 8% per year (compared to 0.8% per month, i.e. 9.6% per year, before 2023). This rate is reviewed annually.
- Joint liability: The customer may be held jointly liable for the payment of VAT if the reverse charge has not been correctly carried out, even if the error originated with the supplier.
- Risk of reclassification: The tax administration may reclassify the transaction and require payment of VAT under the normal regime, with all associated penalties.
It should be noted that the Belgian tax administration is adopting an increasingly strict approach to checking mandatory mentions on invoices. VAT audits systematically verify the presence and accuracy of these mentions.
Flexina and reverse charge
Flexina allows you to manage reverse charge on your invoices:
- VAT rate configuration: configure your VAT rates, including the 0% rate for reverse charge.
- Customizable mandatory mentions: add the required reverse charge mention in your invoice template settings.
- Peppol compatibility: invoices sent via Peppol include the VAT codes you have configured, ensuring proper mapping with your clients' accounting systems.
- Multilingual: configure your mentions in French, Dutch or German depending on the invoicing language.
Flexina provides the tools you need to meet your obligations, but it is your responsibility to verify the conditions for applying reverse charge in each situation.
Frequently asked questions
Does the new mention apply only to real estate work?
The specific mention introduced by the Royal Decree of 26/10/2022 primarily concerns real estate work covered by Article 20 of Royal Decree No. 1. However, other reverse charge situations (intra-Community services, transactions covered by Article 51, §2 of the VAT Code) have their own mandatory mentions that must also be respected.
What happens if my customer is a mixed or exempt taxable person?
If your customer is an exempt taxable person (for example, a doctor or an educational institution) or a taxable person who does not file periodic VAT returns, the reverse charge regime for real estate work does not apply. You must then charge VAT normally. In case of doubt, verify your customer's VAT status via the Crossroads Bank for Enterprises online service or via VIES.
Is the old mention "Reverse charge" or "VAT due by the co-contractor" still valid?
No. Since January 1, 2023, the old simplified mention is no longer sufficient for real estate work. You must use the complete mention as provided by the Royal Decree. Invoices issued with the old mention after this date are considered non-compliant and expose the issuer to penalties.
Must the mention appear in a specific language?
The mention must be written in the language of the invoice. If your customer is established in the Flemish region, the mention must be in Dutch. If your customer is established in the Walloon region, it must be in French. For customers located in the Brussels-Capital Region, the invoice may be drafted in French or Dutch. For customers in the German-speaking Community, the mention must be in German.
How do I declare self-assessed VAT in my periodic return?
As a customer receiving an invoice with reverse charge, you must report the tax base in box 87 (for Belgian real estate work) or in box 88 (for intra-Community services) of your VAT return. The corresponding VAT is reported in box 56 (VAT due) and simultaneously in box 59 (deductible VAT), if you have a full right of deduction. The net result is therefore cash-neutral.
Must credit notes also include this mention?
Yes. If a credit note is issued to correct or cancel an invoice subject to the reverse charge regime, this credit note must also include the mandatory mention. The same rules apply regarding the mention and the VAT regime.
Conclusion
The new mandatory mention on real estate work invoices with VAT reverse charge in Belgium aims to clarify customers' tax obligations and avoid non-compliance situations. The companies concerned must comply with this new obligation since January 1, 2023, under penalty of having their responsibility engaged. This new regulation comes from the Royal Decree of 26/10/2022 modifying Royal Decrees Nos. 1, 2, 3, 4, 10, 19, 22 and 59 regarding value added tax, Belgian Official Gazette of November 10, 2022.
As a business active in the construction sector or providing real estate services in Belgium, it is essential to verify that your invoices comply with this regulation. Using invoicing software like Flexina, which automatically incorporates these mandatory mentions, is the best guarantee of compliance and allows you to focus on your core business.
