Executive Summary
Belgium is undergoing a significant transformation in its Value Added Tax (VAT) and invoicing landscape, primarily driven by the implementation of mandatory B2B e-invoicing and updates to VAT rates and reporting obligations. The core objectives of these reforms are to combat tax evasion, reduce the “VAT gap,” enhance tax efficiency, and promote business digitalization, aligning with broader European Union initiatives like “VAT in the Digital Age” (ViDA).
A major focus is the mandatory B2B e-invoicing requirement, effective January 1, 2026, for all VAT-registered businesses within Belgium. This mandate specifies the use of “structured electronic invoices” (SEF), primarily through the Peppol BIS (Business Interoperability Specification) in the UBL (Universal Business Language) version, transmitted via the Peppol network. Non-compliance carries significant financial penalties and could lead to denial of VAT deduction rights. Despite the impending deadline, a substantial portion of Belgian companies (70%) are not yet prepared.
Alongside e-invoicing, Belgium is adjusting its VAT rates for specific sectors, notably introducing a permanent reduced 6% VAT rate for the demolition and reconstruction of residential buildings, and altering rates for fossil fuel heating systems and coal. Changes to VAT deduction rules for mixed and partial taxpayers, including exemptions for Small and Medium-sized Enterprises (SMEs), are also being implemented to ease administrative burdens.
I. Mandatory E-Invoicing for B2B Transactions
Belgium is moving towards a fully digital tax system with mandatory structured electronic invoicing for Business-to-Business (B2B) transactions.
A. Key Dates and Scope
- Effective Date: Mandatory B2B structured e-invoicing comes into effect on January 1, 2026. This applies to “all VAT-liable operations between VAT-liable entities established in Belgium and registered for VAT purposes.” (Briefing Document & Podcast: Belgium Mandatory B2B E-Invoicing)
- No Paper/Unstructured Formats: As of this date, “Paper invoices and unstructured formats (e.g., PDF) will not be allowed” for mandated transactions. (Belgium Confirms 2026 Peppol E-Invoicing Mandate with 2028 Near Real-Time Reporting to Follow)
- Mandatory B2G E-invoicing: B2G (Business-to-Government) e-invoicing has been mandatory since March 1, 2024, with a phased implementation based on contract value (eInvoicing in Belgium). The Mercurius platform serves as the central hub for B2G e-invoicing.
- Future E-Reporting: Belgium plans to introduce a “mandatory near real-time e-Reporting system for tax purposes, starting on January 1, 2028,” which will likely leverage the Peppol 5-corner model and eventually replace the annual VAT client listing. (Belgium Confirms 2026 Peppol E-Invoicing Mandate with 2028 Near Real-Time Reporting to Follow; Briefing Document & Podcast: Belgium Mandatory B2B E-Invoicing)
B. Technical Standards and Network
- Default Standard: The primary technical standard is the “Peppol BIS (Business Interoperability Specification) in the UBL (Universal Business Language) version.” (Belgium’s E-Invoicing and VAT Transformation Explained; Royal Decree on Structured Electronic Invoices)
- Default Transmission Network: Invoices “must be transmitted via the Peppol-transmissienetwerk” (Peppol transmission network). (Royal Decree on Structured Electronic Invoices)
- Interoperability: The mandate emphasizes full interoperability at semantic (content meaning), syntactic (structured format), and technical (transmission method) levels. Peppol ensures this “seamless, secure, and standardized communication.” (Briefing Document & Podcast: Belgium Mandatory B2B E-Invoicing)
- Alternative Formats: While Peppol BIS UBL is the default, “a taxpayer may use a different format and potentially a different digital transmission method if both parties involved in the transaction agree.” However, any alternative format “must still comply with the European semantic and syntactic standards, specifically EN 16931.” (Briefing Document & Podcast: Belgium Mandatory B2B E-Invoicing)
- Mandatory Peppol Capabilities: Crucially, businesses “are still required to possess the technical capability to issue and receive structured electronic invoices in the Peppol BIS format, as they cannot unilaterally impose an alternative format on their trading partners.” (Briefing Document & Podcast: Belgium Mandatory B2B E-Invoicing)
C. Exemptions from B2B E-Invoicing
The mandate generally applies to VAT-registered entities established in Belgium for transactions where the place of supply is in Belgium. However, certain exemptions apply:
- Suppliers: Foreign entities solely VAT-registered in Belgium, Belgian entities performing specific VAT-exempt activities (under Article 44 of the VAT Code), bankrupt entities, and those under a special flat-rate scheme (to be abolished in 2028). (Briefing Document & Podcast: Belgium Mandatory B2B E-Invoicing)
- Customers: Certain VAT-exempt entities and foreign taxpayers with a Belgian VAT number but no permanent establishment are exempt from receiving e-invoices. (Briefing Document & Podcast: Belgium Mandatory B2B E-Invoicing)
- Transactions: B2C (Business-to-Consumer) transactions are exempt, as are intra-community supplies and services taxed in another EU country. (Belgium Clarifies 2026 B2B E-Invoicing Rules for VAT-Registered Taxpayers with Penalties for Non-Compliance; Briefing Document & Podcast: Belgium Mandatory B2B E-Invoicing)
- Mixed VAT Taxpayers: Mixed VAT taxpayers must comply with e-invoicing for their VAT-registered activities. Self-employed individuals in secondary occupations and small businesses under VAT exemption must also comply if invoicing other businesses. (Mandatory E-Invoicing for Belgian Mixed VAT Taxpayers Starting 2026)
D. Compliance and Penalties
- Fines for Lack of Technical Means: New administrative fines apply for not having the technical means to issue and receive structured electronic invoices:
- First offense: €1,500
- Second offense: €3,000
- Subsequent offenses: €5,000 (Belgium’s E-Invoicing and VAT Transformation Explained; Royal Decree on Structured Electronic Invoices)
- Grace Period: A three-month grace period is provided before a “second” or “subsequent” offense is recorded, allowing businesses time to rectify issues. (Royal Decree on Structured Electronic Invoices)
- Denial of VAT Deduction: “Non-compliant invoices may lead to the denial of VAT deduction rights for the recipient.” (Belgium’s E-Invoicing and VAT Transformation Explained; Belgium Enforces Mandatory B2B E-Invoicing via PEPPOL Network Starting January 2026)
- Existing Penalties: Existing penalties for late or incorrect invoices still apply. (Belgium Mandates B2B E-Invoicing by 2026: Prepare for Compliance and Avoid Penalties)
- Invoice Content: Structured e-invoices must include clear descriptions, quantities, VAT in euros, and credit note references. Failure to comply can lead to denied deductions. (Belgium’s Mandatory B2B E-Invoicing: Key Requirements and Penalties Starting 2026)
E. Current State of Preparedness
- 70% Unprepared: Approximately “70 percent of Belgian companies are not yet ready for mandatory e-invoicing by January 2026.” Only one-third currently use e-invoicing. (70% of Belgian Companies Unprepared for Mandatory E-Invoicing by 2026 Deadline)
- Medium-sized Companies: “Medium-sized companies face the most challenges in preparation,” while small and large companies are comparatively more prepared. (70% of Belgian Companies Unprepared for Mandatory E-Invoicing by 2026 Deadline)
- Guidance for Unprepared Customers: Suppliers dealing with customers lacking a Peppol ID should “initiate communication,” “guide them on obtaining a Peppol ID,” “explore temporary invoicing solutions,” and “highlight the benefits of e-invoicing.” (B2B E-Invoicing Mandate: What to Do If Your Customer Lacks a Peppol ID?)
II. VAT Rate Changes and Deductions
Belgium has also implemented or is implementing changes to specific VAT rates and clarifying VAT deduction rules.
A. Demolition and Reconstruction of Residential Buildings
- Permanent Reduced Rate: Belgium has adopted a “permanent 6% reduced VAT rate on demolition and reconstruction of private residential buildings,” effective from July 1, 2025. This rate also applies to the sale of such reconstructed buildings, which were previously subject to 21% VAT. (Belgium Adopts Permanent 6% VAT Rate for Demolition and Reconstruction of Residential Buildings; Program Law and 3 circular letters published on demolition and reconstruction, heating systems, and coal)
- Conditions: Specific conditions apply, including limitations on habitable surface area (e.g., 175 m² for sales to private buyers and 200 m² for renovation works) and, for rental properties, a long-term rental commitment. (Belgium Adopts Permanent 6% VAT Rate for Demolition and Reconstruction of Residential Buildings; Belgium Implements Permanent 6% VAT on Newly Reconstructed Buildings for Residential Rental Use)
- Transitional Tolerance: Due to legislative delays, the standard 21% VAT rate might temporarily apply after July 1, 2025, but administrative tolerance allows proactive application of the 6% rate if all conditions of the new law are met. New VAT forms must be filed via MyMinfin starting October 2025. (Circular 2025/C/44 on VAT rate for Demolition and Reconstruction; Update: Administrative Tolerance for New 6% VAT Rate on Demolition and Reconstruction Awaiting Approval)
B. Heating Systems and Coal
- Fossil Fuel Heating Systems: The reduced 6% VAT rate will “no longer qualify for the 6% VAT rate” for parts or components of central heating systems operating on fossil fuels, effective from July 29, 2025. (Belgium Adopts Permanent 6% VAT Rate for Demolition and Reconstruction of Residential Buildings; Program Law and 3 circular letters published on demolition and reconstruction, heating systems, and coal) A ministerial tolerance allows the 6% rate for agreements signed before certain deadlines, provided VAT is chargeable by June 30, 2026. (Program Law and 3 circular letters published on demolition and reconstruction, heating systems, and coal)
- Coal: The reduced 12% VAT rate on coal has been abolished, making it subject to the standard 21% VAT rate starting from July 29, 2025. (Program Law and 3 circular letters published on demolition and reconstruction, heating systems, and coal)
C. VAT Deduction Rules for Partial and Mixed Taxpayers
- Annual Reporting: Partial and mixed VAT taxpayers using the actual use method must annually report the percentage breakdown of VAT charged on transactions related to fully deductible, non-deductible, and partially deductible sectors in their periodic VAT returns. (VAT Deduction According to Actual Use – Additional Tolerance)
- Extended Deadlines for 2025: The deadlines for submitting this information for 2025 have been postponed to July 25 for Q2 2025 and July 22 for June 2025. Taxpayers can use estimates, with final figures due by October 25 for Q3 2025 and December 22 for November 2025. (Belgium Clarifies VAT Deduction Rules and Deadlines for Partial and Mixed Taxpayers, SMEs Exemptions)
- SME Exemptions: “SMEs are exempt from communicating final figures for Q3 2025 and November 2025.” From 2026 onwards, “this obligation will no longer apply to SMEs,” easing their administrative burden. (Belgium: SMEs Exempt from Detailed VAT Deduction Reporting from 2026; New VAT Reporting Deadlines Announced for Mixed and Partial Taxpayers, Easing Administrative Burden)
- Large Companies: Large companies must still provide final figures. (VAT Deduction According to Actual Use – Additional Tolerance)
D. VAT Rounding Rules for E-Invoices
- New Rule: For structured electronic invoices, “rounding of the VAT amount is now exclusively permitted on the total amount of tax stated on the invoice.” (Belgium’s E-Invoicing and VAT Transformation Explained; Royal Decree on Structured Electronic Invoices)
- No Rounding Per Line Item: This means “rounding per individual line item (per transaction) on a structured electronic invoice is no longer allowed.” (Belgium’s E-Invoicing and VAT Transformation Explained)
E. VAT Penalties and Legal Interpretations
- Court of Cassation Ruling on Fraud Penalties: The Belgian Court of Cassation has ruled that courts “cannot reduce the 200% VAT penalty for fraud cases,” unless the taxpayer first applies for clemency from the Minister of Finance under the 1831 Regent Decree. Judges can only apply the proportionality test after the Ministry has acted. (Significant Ruling by the Court of Cassation: VAT Penalty Guidelines Revised) This creates a two-step process (administrative then judicial) for taxpayers seeking penalty mitigation.
- VAT Deduction and Invoice Regularity: To exercise VAT deduction rights, taxpayers must possess a “regular invoice that meets specific formal requirements.” (To remember: Circular 2017/C/64 on the invoice, condition for exercising the right of deduction in relation to VAT) While the “substance over form” principle allows for deductions even if some formal conditions are not met, provided material conditions are satisfied and no fraud is indicated, clear and accurate invoicing remains crucial. (E-Invoicing in Belgium: formal VAT requirements effective 2026; To remember: Circular 2017/C/64 on the invoice, condition for exercising the right of deduction in relation to VAT)
- Fixed Establishment Ruling: The Court of Appeal upheld the CJEU’s ruling that “Cabot Switzerland does not have a fixed establishment for VAT purposes in Belgium” regarding toll manufacturing services received in Switzerland. This highlights the importance of understanding VAT legislation nuances for establishing a fixed establishment. (Court of Liege Confirms Cabot Plastics has no fixed establishment in Belgium)
- VAT Adjustments for Leased Immovable Property: A pending ECJ case (T-397/25 A&P Deco) seeks clarification on whether VAT adjustments apply to the transferor when immovable property is leased after a business transfer, particularly if the property continues to be used for taxable activities by the transferee. (General Court VAT Case T-397/25 (A&P Deco) – Questions – Should VAT adjustments apply when immovable property is leased after a business transfer?)
III. Other Regulatory Updates
- NACE-BEL Codes: The Belgian Tax Authority has updated NACE-BEL codes to align with EU standards NACE Rev. 2.1, effective January 1, 2025. Businesses are advised to review and update their activity codes and VAT records. (Belgium Updates NACE-BEL Codes to Align with EU Standards Effective January 2025)
- Postponed Accounting System for Import VAT: Belgium offers a postponed accounting system for import VAT, allowing VAT-registered businesses to defer VAT payments on imported goods and declare/deduct them on the same VAT return. This improves cash flow and reduces administrative burdens but requires a formal application and compliance. (Postponed accounting system for Import VAT in Belgium)
- Electronic Signatures: Belgian law recognizes electronic signatures, referring to the eIDAS Regulation for definitions and distinguishing between ordinary, advanced, and qualified types based on security levels. (The Legal Acceptance of Electronic Signatures in Belgian Law: An Overview)
- Technical Issue with e604 Application: A technical issue currently prevents online submission of the e604B form for VAT regime changes. Businesses are advised to submit the form via email or post until the issue is resolved. (Technical Issue with e604 Application Prevents VAT Regime Change Form Submission)
Conclusion and Recommendations
Belgium’s digital tax transformation is comprehensive, with mandatory B2B e-invoicing taking center stage from January 2026. The clear adoption of Peppol as the default network and the introduction of significant penalties for non-compliance underscore the urgency for businesses to prepare.
Companies, especially medium-sized ones, must prioritize upgrading their systems and processes to achieve Peppol BIS compatibility and ensure they can issue and receive structured electronic invoices. Proactive engagement with accredited Access Points and service providers is crucial to avoid disruptions, financial penalties, and denial of VAT deduction rights. Furthermore, businesses in the real estate sector and those dealing with fossil fuels should take note of the specific VAT rate changes and their effective dates, while all VAT-registered entities should remain vigilant regarding evolving VAT deduction and reporting requirements, particularly for mixed and partial taxpayers.
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