Belgium VAT rate increase 2014

Shifting the tax burden from business to consumption

The news came from the Finance Minister, Koen Geens, who said the rise would be agreed after May’s general elections. This rise has been settled with the other leading political parties, so will go ahead. However, it is not clear yet what the rise will be – probably by 1% to 22%. The EU average VAT rate is over 21%

The extra Belgium VAT rise will be used to fund a reduction in the labour tax rate, which is close to the highest in the European Union, and hurting job creation. In addition, there may be a cut in corporate income tax which is 33.99%, compared Netherlands at 25% and the UK at 22% and falling. The EU average company tax rate is 22.75%.

Belgium is one of the few EU countries that has not raised its standard VAT rates since the start of the financial crisis. Italy hiked its VAT rate to 22% recently. Other countries which have raised their rates include Spain, Portugal, France, Netherlands, UK, Ireland and most of Central and Eastern Europe.

It was thought that Belgium would be able to avoid such a rise by instead creating a new tax, Belgian ‘Fairness Tax’ on holding companies. Belgium has been struggling recently to reach its € deficit target of 3% of GDP. Belgium VAT rate increase 2014 » VAT Live.

Shortages of SAP codes solution

By using Taxmarc™ Tax Code Solution no new VAT codes in SAP are required when a VAT rate changes. Only the effective VAT rate needs to be changed in SAP. Taxmarc™ Tax Code Solution offers a new design for tax codes in SAP that resolves limitations of standard SAP, without changing the standard functionality of SAP. The risk of a shortage of tax codes is eliminated and the name and description of a tax code in SAP will always remain the same.

Who will benefit?

Companies with multiple VAT registrations (in 10+ countries), principal structures, complex business model for sales of goods, cross-border, drop shipment, shortage tax codes (use of 900+ SAP tax codes) and/or centralized functions.

Return on Investment

A single VAT rate change takes often (set up and test cycle prior to production) about 200 – 300 hours. After implementation this is reduced to 2-3 hours and in order to calculate hard savings the surplus has to be multiplied by the amount of global VAT changes.

Note that as tax code structure never changes (logic remains always the same ) less processes and controls are needed which result as well in workforce efficiency (update manuals, update decision trees, AP training needed, etc) and thus hard savings.