25 Jan New Circular letter broadens scope of application of Belgian VAT exemption for cost-sharing associations

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Belgian tax rules and regulations provide for a specific exemption for so-called cost-sharing associations. Cost-sharing associations are groups of entities that are exempt from VAT or perform activities outside the scope of VAT, and pool common resources and services. If specific conditions are met, this pooling of resources and services can be done without any VAT cost. Those conditions, initially laid out in a Royal Decree and an administrative letter dated May 1996, have now been updated. Circular letter 31/2016 of December 12th, 2016, clarifies the new regime.

Some of the highlights of the new regime are:

  • The cost-sharing association can only have one of the following two distinct forms: it is either an association with separate legal personality or is an association without legal personality but acting under its own name
  • The types of activities that the members of a cost-sharing association can perform have been made significantly more flexible. It is no longer a requirement that members should be part of the same financial, economic, social or professional group. Moreover, members must no longer perform activities that are fully exempt or are outside the scope of VAT
  • The cost-sharing association must predominantly provide services to its members, yet can also provide services to non-members (the latter being subject to normal VAT rules)

The new interpretation of this VAT exemption will likely result in more groups of entities qualifying for the regime, making the VAT exemption for cost-associations a VAT savings tool worth considering.

In addition, the new rules allow cost-sharing associations to have both VAT exempt and VAT taxable activities, thus allowing these associations to become mixed taxpayers who can (partially) recover input VAT and adjust VAT recovery for past investments.

For a copy of the circular letter, clich here (Dutch / French).

If you would like more information on the VAT exemption for cost-sharing associations, do not hesitate to contact us.