In Belgium, most self-employed people need to charge VAT on all products and services they provide. But there’s one exception: when you invoice as a ‘co-contractor’, the VAT is reverse charged, meaning you don’t charge it to your customers. But how does the VAT co-contractor scheme work and under what conditions can you apply it? Find out below.
What is a VAT co-contractor?
The VAT co-contractor scheme is a specific concept within the Belgian VAT regime which only applies in the case of work on real estate involving two parties subject to VAT.
In other words, thanks to the co-contractor system, a self-employed person subject to VAT does not have to charge VAT for work on the real estate of a client who is subject to VAT.
The idea is to transfer the responsibility of paying VAT from the contractor to the customer. The VAT is therefore reverse charged to the customer or buyer.
Is the concept of the VAT co-contractor scheme not fully clear yet? No worries. Below, you’ll find the rules of the system and concrete examples to help you better understand it.
In what cases can the VAT co-contractor scheme be applied?
Condition 1: work on real estate
The concept of VAT co-contractor can only be applied to a contract related to work on real estate. This includes a multitude of services, such as:
- installation of a new roof or new facade or floor covering;
- painting work;
- construction work, such as the extension of a building;
- installation of an electric charging station or sanitary facilities, such as a heat pump or air conditioning;
- installation of parking spaces, an entrance or a terrace;
- electrical work;
- all kinds of renovation, repair and maintenance work on a building.
Which services are not covered by the VAT co-contractor scheme?
The VAT co-contractor scheme cannot be applied to the installation of devices that are not fixed to the building or the ground (e.g. a washing machine, lighting, printer, etc.).
Also, as a self-employed person, you can’t reverse charge the VAT if you supply something without installing or placing it. In these cases, you need to charge the standard VAT rate on the product supplied.
Condition 2: professional purposes
You can only invoice as a VAT co-contractor if you carry out work on real estate being used for professional purposes. Buildings used partially to carry out a self-employed activity are also eligible.
The VAT co-contractor scheme therefore applies as much to a building in the name of a company as to a private residence that a self-employed sole trader or company has partially converted into an office or store.
Below, you can find concrete examples of invoicing for buildings used for professional and mixed purposes as a VAT co-contractor.
Condition 3: subject to VAT
You can only apply the concept of VAT co-contractor if both you and your customer are subject to VAT. This means you must both be submitting periodic VAT returns.
What about companies exempt from VAT?
The reverse charge linked to the VAT co-contractor scheme is intended for entrepreneurs subject to VAT in Belgium. If you’re exempt from VAT, for example, because you’re subject to the VAT exemption scheme for small businesses or you carry out an activity that is exempt from VAT, it’s therefore not possible to reverse the VAT. In this case, you simply indicate the VAT on your invoice. And if the customer is exempt from VAT, they will simply have to pay it to you as standard.
What are the advantages of the VAT co-contractor scheme?
For the seller (most often an entrepreneur), creating an invoice according to the co-contractor scheme has no advantages. You don’t charge VAT, you don’t collect VAT from your customer, and you therefore don’t pay VAT back to the State for this invoice.
However, the VAT co-contractor system has advantages for the customer. First of all, you don’t have to pay VAT to the contractor and then recover it through your periodic VAT return. That’s good news for your cash flow, especially if you’re taking your first steps as a self-employed person.
Reverse charging VAT: examples of invoicing with the co-contractor scheme
As you’ve seen above, the VAT co-contractor scheme applies to real estate that’s used in whole or in part for professional purposes. But how do you actually draw up an invoice where the VAT is reverse charged?
Here are some practical examples that can help you draw up your VAT co-contractor invoices and add them correctly to your accounting.
Example 1: co-contractor for 100% professional use
As a self-employed individual or company, you have painting work done in the office that you use exclusively for your self-employed activity.
The painter who paints your office can therefore draw up a co-contractor invoice without VAT. For example, if the total cost of the work is €10,000, you will pay €10,000 (as a customer who is subject to VAT).
The VAT is reverse charged and is therefore not shown on the invoice. Usually, as a customer, you need to pay VAT and then later, declare it. But in this case, since it’s a zero-sum transaction, there is no VAT to pay to the VAT authorities.
Example 2: reverse charged VAT for mixed use real estate
You can apply the VAT co-contractor scheme on your home if the property is used for both professional and private purposes, i.e. mixed use. Let’s say you’re having painting work done on your office, but also on the rest of your house.
In this example, we’ll assume 25% professional use (€2,500) and 75% private use (€7,500).
The painter splits his invoice so that the VAT co-contractor concept can be applied to the work done in the part used for professional purposes. For the work done in the private part of the building, the painter will charge VAT as standard.
As a customer, you’ll therefore pay €2,500 (with reverse-charged VAT) via your company for the work done in your office and €7,500 + 21% VAT, or €9,075 for the painting work done in the rest of the property. You cannot recover this VAT.
💡 Accountable tip: Are you unsure about the VAT rate to apply? Check out our article on the different VAT rates applied in Belgium. In certain situations, the work is invoiced at a VAT rate of 6%, which can represent a significant saving. However, this VAT rate cannot be combined with the co-contractor system. You therefore can’t reverse charge the VAT if it’s invoiced at 6%.
What information should be added to a VAT co-contractor invoice?
Previously, the following statement was sufficient: ‘Self-assessment of VAT in accordance with Art. 20 of Royal Decree No. 1.’ (« Autoliquidation de la TVA conformément à l’art. 20 de l’AR n° 1 » / ‘Btw verlegd volgens art. 20 KB nr. 1.’)
However, now you need to indicate a more detailed note on your invoice:
French
« Autoliquidation : En l’absence de contestation par écrit, dans un délai d’un mois à compter de la réception de la facture, le client est présumé reconnaître qu’il est un assujetti tenu au dépôt de déclarations périodiques. Si cette condition n’est pas remplie, le client endossera, par rapport à cette condition, la responsabilité quant au paiement de la taxe, des intérêts et des amendes dus. (AR 26.10.2022, MB 10.11.2022, ed. 2, 10.11.2022, art. 13). »
Dutch
‘Verlegging van heffing. Bij gebrek aan schriftelijke betwisting binnen een termijn van één maand na de ontvangst van de factuur, wordt de afnemer geacht te erkennen dat hij een belastingplichtige is gehouden tot de indiening van periodieke aangiften. Als die voorwaarde niet vervuld is, is de afnemer ten aanzien van die voorwaarde aansprakelijk voor de betaling van de verschuldigde belasting, interesten en geldboeten (AR 26.10.2022, MB 10.11.2022, ed. 2, 10.11.2022, art. 13).’
English
‘Self-assessment: In the absence of a written objection, within one month of receipt of the invoice, the customer is presumed to acknowledge that he is a taxable person required to file periodic returns. If this condition is not met, the customer will assume, in relation to this condition, responsibility for the payment of the tax, interest and fines due. (AR 26.10.2022, MB 10.11.2022, ed. 2, 10.11.2022, art. 13).’
Managing your admin yourself as a co-contractor, it’s perfectly possible!
As a sole trader, do you handle your accounting yourself? There’s no need to worry about the obligations related to the VAT co-contractor scheme. An accounting program like Accountable helps you to properly manage all your administrative obligations.
For example, Accountable lets you opt for a 0% VAT rate on your invoices and to select the reason ‘Co-contractor reverse charge’. We make sure that the mandatory text mentioned above appears automatically on your invoice.
And what about adding a purchase invoice with reverse-charged VAT as a deductible business expense in the application? Here too, you can indicate that it’s a ‘co-contractor expense’. Our software will classify it in the correct category and automatically take it into account in your VAT return.
