Restricted measures for leight freight vehicles and introduction of an anti-abuse measure
The Belgian Parliament approved on 27 December 2005 a program Bill with various rules and regulations concerning VAT issues. The most remarkable tax measures which affect VAT are the introduction of a general anti-abuse rule and the rewriting of the article concerning the limitation of deduction for vehicles.
1. Anti- abuse provision
The program Bill introduces a new article 59§3 in the Belgian VAT code. This article 59 §3 is similar to article 344§1 WIB that applies in connection with direct taxes.
The anti-abuse provision in the VAT code allows the VAT authorities to recharacterize an action if the purpose of the transaction was solely to avoid VAT. The possibility remains for the taxpayer to prove that his transaction meets legitimate financial or economic needs.
This anti-abuse measure will apply retroactively as from 1 November 2005.
2. Alteration of the limitation of deduction on vehicles.
Mainly this rewriting of article 45§2 Belgian VAT code implies the absorption of previous administrative decisions by the Belgian VAT administration. The Program Bill amends article 45 §2 of the Belgian VAT code whereby vans that were subject to a full VAT recovery will be from now on be subject to a 50% limitation of deduction. The adaptation implemented by the Program Bill will in fact lead to a restriction of the right to deduct.
Since problems arose regarding the definition of light freight vehicles the Program Bill also made reference towards the definition of light freight vehicles in the “with income taxes equated taxes” Code. Four categories of vehicles are accepted as light freight vehicles according to this definition. Besides the reference to the definition in the tax code for with income taxes equated taxes, a long list with explicit exceptions on the limitation of deduction is introduced. As a consequence a 100% deduction of input VAT will in principle be possible for the following vehicles:
- Every vehicle interpreted and built for the transport of goods whereof the maximum allowed weight does not exceed 3500 kilogram’s. The vehicle must consist out of on the one hand an open container and on the other hand a cabin with maximum two seats (the seat of the driver excluded) and which is totally separated from the container.
- Every vehicle interpreted and built for the transport of goods whereof the maximum allowed weight does not exceed 3500 kilogram’s. The vehicle must consist out of on the one hand an open container and on the other hand a cabin with maximum 6 seats (driver’s seat not included) and which is totally separated from the container.
- Every vehicle interpreted and built for the transport of goods whereof the maximum allowed weight does not exceed 3500 kilogram’s. The vehicle must consist out of a passenger space that contains maximum two seats (driver’s seat not included) and a separate container. The distance in the container between each point of the partitions behind the seats and the inside of the back of the container must amount to 50% of the length of the wheelbase. This distance needs to be measured in the long direction of the vehicle, at a height of 20 centimeters above the ground. Above that, the total surface of the container must consist out of a fixed or durable attached horizontal floor without possibilities to install seats, benches or safety belts and which forms an integral part of the framework.
- Identical as the previous point, but with a passenger space that may exist maximum out of 6 seats (driver’s seat not included)
- vehicles with a maximum weight of more than 3500 kg
- vehicles for passenger traffic with more than 8 seats, the driver’s seat not included
- vehicles which are especially equipped for the traffic of ill or wounded people, prisoners or corpses
- vehicles which cannot be registered with the Service for Registration of Vehicles, due to technical characteristics
- vehicles which are specially equipped for camping
- motorcycles and motorbikes
- vehicles destined to be sold by a VAT taxable person who exercises an economic activity consisting out of the sale of vehicles
- vehicles destined to be leased by a VAT taxable person who exercises an economic activity that exists out of the lease of vehicles
- vehicles solely destined to be used for paid passenger traffic
- intra- community supply of new vehicles by an occasional VAT taxpayer
This new measure has as effect a restriction as a result of which full VAT recovery on certain luxurious cross-country vehicles and mono-volume vehicles will no longer be accepted.
At the same time also a few restrictions are introduced, the article only allows a full input deduction of VAT on leased vehicles to taxable persons, in case they carry out specific leasing activities.
The new measures will be applicable as from 1 January 2006.
