The ‘VAT co-contractor’ system boils down to the fact that you, as a VAT-registered entrepreneur, do not have to charge VAT to a VAT-registered customer for works on immovable goods. That’s still a complex definition, don’t worry below we explain the vAT co-contractor system step by step!
VAT co-contractor: working on real estate goods?
Back to the definition of VAT co-contractor, namely: as a VAT-registered entrepreneur, you do not have to charge VAT to a VAT-registered customer for work on immovable goods. 🧱
Let’s start with the concept of ‘works on immovable goods’. This sounds complex, but it is not too bad. Think of all kinds of works to a building and/or land. This includes many categories, such as painting, a new roof, the construction of a driveway or garden, renovations to a house or flat, cleaning a house, etc.
The literal definition of a property is the next: a piece of land and everything that is in or states on that land, including all the goods attached to that land or building that one cannot take away without damaging something.
The terms?
- Both you and your customer must be VAT-registered businesses filing a periodic vAT declaration.
- The premises to which the works have been done must be used professionally. This may also include mixed use, in other words partly private and partly professional. As soon as there is professional use, however small, invoicing must go through the vAT co-contractor system.
VAT co-contractor: making a sales invoice?
Suppose you, as a VAT-registered entrepreneur, have carried out certain electricity work for a customer subject to VAT, then you have to prepare this sales invoice with 0% VAT. You are legally required to work through the vAT co-contractor system in such a situation.
New from 1 January 2023
1️⃣ Notification obligation
There is now an obligation from customers to spontaneously notify when they do not meet the conditions to invoice with co-contractor. This is mainly meant for VAT exempted companies (small business, turnover lower than €25,000 on an annual basis), which have a vAT number but do not submit VAT declarations.
2️⃣ New invoice entry
From 1 January 2023, invoices made out with co-contractors must include a new entry. Instead of ‘VAT transferred’, the next notifications must be made:
“Reverse charge. In the absence of a written objection within a term of one month after receipt of the invoice, the customer is deemed to acknowledge that he is a taxable person liable to submit periodical declarations. If that condition is not met, the customer will be liable for payments of taxes, interest and fines due in respect of that condition.”
Does vAT co-contractor have an advantage?
If you issue an invoice with 0% VAT (VAT transferred), there is no advantage for you as a seller. You do not charge VAT, you do not receive VAT on your customer and you obviously do not have to pass on VAT to the VAT authorities for that sales invoice.
If you receive invoices with 0% vAT (vAT co-contractor), you do have an advantage as a buyer. You don’t have to pay the VAT to suppliers first and then go and recover that VAT in a vAT declaration a few weeks/months later. Good for your cash flow!
VAT transferred: An example
A self-employed handyman carries out maintenance work on a house that is partly used professionally by Mr Janssens, a self-employed IT consultant who is subject to VAT. Mr Janssens owns the property privately and has a small home office for his self-employed activities.
Even though the maintenance work is spread throughout the house (predominantly private), as soon as it also relates to the home office (professional) and Mr Janssens wants an invoice on his business, the self-employed handyman must issue a sales invoice with 0% vAT co-contractor.
In this video you can also find how to turn on this option in Dexxter and then create your sales invoices with vAT co-contractor!
Any further questions? 📢
Perfectly normal! Have you discovered our Dexxter community yet? That’s where a lot of entrepreneurs ask a lot of questions about doing business, entering costs, preparing sales invoices, etc. And also about the vAT co-contractor system.
Would you like to discover our community? Then create a profile via Dexxter and discover it during your 30-day free trial.
