The Belgian VAT administration has published a new circular letter1 on the scope of the VAT exemption2 of professional associations rendering certain services in the collective interest of their members.
The VAT administration does not fundamentally change its previous position, but provides an update which takes into account the case law of the European Court of Justice and the evolution of the activities of professional associations in the past decades.
Membership fees
As it was already the case, membership or subscription fees must be fixed in accordance with the Articles of Association and paid by members. Services supplied for the benefit of a few or all members at a price separate from the membership fee do not fall within the scope of the exemption.
The organization must defend and represent the collective interests of its members
The main objective of the professional organization must be to defend and represent the collective interests of its members, in so far as it provides members with a representative voice and strength in negotiations with third parties (such as the European institutions). In order to determine the main objective of the organization, all its services must be analyzed, taking into account their relative importance and elements such as their nature, the quality of the association's members, the members' goals etc.
The new circular also stipulates that services supplied individually to its members, instead of carried out globally, are VAT taxable services. However, the circular also specifies that an individual service supplied to a member in the framework of its main objective and from which all members benefit, is exempt.
When does an organization meet the above conditions?
International or national associations that represent a specific sector of activity and that defend its interests towards authorities notably with the objective of influencing policy making and the decision-making processes, fall within the scope of the exemption. The pursuit of these goals may require carrying out surveys, publications or meetings that are also VAT exempt.
On the contrary, the new circular letter stresses that an organization supplying services in order to promote the economic or commercial interests of its members by rendering them services such as advices, networking, research and development activities, legal opinions and administrative guidelines, representation during events, advertising, does not fall within the scope of the exemption and is thus VAT taxable.
The new circular points out that, in exceptional circumstances, an organization may perform different activities making it impossible to identify a predominant activity. In such a case, the organization can partially deduct VAT.
Entry into force
The new circular letter has entered into force on January 1, 2012. Concerning the past, the circular letter states that all organizations that have respected the previous rules or that have anticipated the new circular letter should not have an issue.
1Circular letter no. E.T.121.844 (AAFisc nr. 1/2012) of 03.01.2012 replacing circular letter no. 12 of 29;12.1986 and all subsequent administrative VAT decisions. .
2Article 44, §2, 11°, of the VAT Code.
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