Belgium: VAT exemption for export supplies

When the new Union Customs Code (UCC) entered into force on May 1, 2016, a definition of exporter of record was introduced into EU customs law. Then the new key element was that the exporter of record had to be established in the EU (with the exception of travelers). On July 30, 2018, this definition changed and so the following article discusses the concept of “exporter” related to the VAT exemption for export supplies in Belgium and what this change means for customs and VAT compliance.

Under the new customs definition (article 1, 19 UCC Delegated Act) it should be easier for EU companies to act as the exporter of record. In the past, the power to determine that the goods were to be taken outside the EU was always required to act as exporter of record. Now it is sufficient that such a company is a party to the sales (export) contract.

Nevertheless, the anticipated change of customs law does not resolve the issue regarding when a non-EU company is involved. Based on a strict reading of the definition, a non-EU company cannot act as the exporter of record for customs purposes.

In its updated explanatory notes, the European Commission has explained that the UCC still provides for a transitional period. During this period, a non-EU company may continue to be named in Box 2 of the Single Administrative Document (“SAD”). This transitional period will end with the introduction of the Automated Export System.

The “exporter of record” concept also has an impact for VAT. The VAT exemption for export is applied by the person who supplies the goods and invokes this VAT exemption. Taking into account the definition of exporter for customs purposes, the exporter of record named in the SAD’s Box 2 will, in a number of cases, not necessarily be the person claiming the VAT exemption for export. Under Belgian VAT law, this is a significant issue as the VAT exemption for export requires, in principle, that the taxable person claiming the export exemption is stated in Box 2.

A good example to illustrate this change is the situation of an EU company that is supplying goods for export to a non-EU company under the incoterm “ex works”. As the non-EU company is responsible for the export of the goods outside the EU, this company will be the exporter of record for customs purposes. In any case, it will need to appoint an indirect customs representative for handling the customs declaration for export. Currently, this requirement means that the non-EU company is named in the SAD’s Box 2, while the indirect customs representative is named in the SAD’s Box 14. However, the EU supplier will invoke the VAT exemption for export. As this EU supplier is not named as the exporter in the SAD, it is impossible to prove the VAT exemption from a Belgian point of view. The Belgian tax authorities have decided to solve this issue by making a distinction within the SAD between the exporter of record for customs purposes (based on the UCC definition) and the exporter for VAT purposes (the company claiming the VAT exemption). Since May 1, 2016, the exporter for VAT purposes must be named in the SAD’s Box 44 (name and VAT number), and the exporter for customs purposes must be stated in Box 2.

Significantly, this rule also applies where the exporter for customs is also the person claiming the VAT exemption for export. The exporter for VAT purposes should always be stated in the SAD’s Box 44.

This is a practical solution from a Belgian perspective and it continues to apply. It is very important for companies involved in export transactions to strictly comply with these new rules, particularly regarding the references in Box 44 for the VAT exemption. This should also be remembered when the export is started in another EU country and the goods will leave the EU via Belgium. As other EU Member States do not apply similar rules for proving the VAT exemption, not complying with the Belgian guidelines could trigger issues in Belgium following a VAT audit.