Webinar: Update on Belgian social security scheme and exemption; New VAT rules for e-commerce since July 1 – 20 October 2021

The Flanders-China Chamber of Commerce (FCCC), with the support of Flanders Investment & Trade, organized a webinar discussing the new VAT rules for e-commerce businesses that have been in place since 1 July 2021 and Belgium's social security scheme. These issues are of particular importance for Chinese companies operating in Belgium. This webinar took place on October 20, 2021.

Ms. Gwenn Sonck, Executive Director, Flanders-China Chamber of Commerce, welcomed the participants to the webinar.

Ms. Katleen Engelen, Senior Manager, EY, presented an update on Belgium’s social security scheme and exemptions. There is a distinction between employee and self-employed. An employee works under the authority of an employer with a labor contract and he receives a salary. There is no social security agreement between Belgium and China. Foreign nationals need a single permit or a work permit allowing them to work in Belgium. A self-employed is not bound by an employment contract, but performs a professional activity, generating income, but there is no authority exercised. Directors of a Belgian company are deemed to exercise a professional activity in Belgium and need a professional card. The Chinese contract of a person assigned to Belgium remains in force. If working for a Belgian company or a Belgian branch of a foreign company, there is the possibility of exemption from social security, but you need to inform the Belgian social security authorities. If there is a local contract, the Belgian social security legislation will be applicable with 13.07% employee and 25% employer contributions. This may be a considerable cost, but the employee will be covered by the Belgian scheme and be able to benefit from it. For new employers there is however a favorable social security scheme, paying almost no contributions for their first employee. Employee contributions will need to be deducted. However, there are plans to introduce a salary ceiling. It should be checked if it is possible to continue to pay into the Chinese social security scheme as well.

Directors are under the rebuttable presumption of self-employed activities in Belgium. You need to pay social security contributions, but there is a way around it as often directors are not paid, in which case you can be exempted. That no income is generated should be mentioned in the nomination decision or the by-laws of the company. A professional card is still required even for a non-remunerated mandate, unless the person only comes to Belgium for business activities with their main residence abroad and stays in Belgium for less than three months. Social security contributions are due if gratuitousness in fact and in law cannot be proven. Self-employed social security contributions on a high salary can reach about €16,000 per year.

We are in a very special period with many people stuck at home due to the Covid situation, not being able to go to the office or go on business trips. The authorities have been flexible. It would not matter where you perform the activities, in Belgium or in another country, but this concession will end on 31 December 2021. In the future there will be more hybrid working models, with more flexibility to work from home. This would complicate the international employment situation. Many employers are still struggling how to set up these new hybrid working models. If people move abroad or work from a different location, there are always labor law implications. It will be interesting to see how it will be set up next year.

Mr. Jan Van Moorsel, Indirect Tax Partner, EY, introduced the VAT rules for e-commerce. People working at home means that e-commerce is booming. On July 1 new rules came into force in the EU. There are key questions you need to ask to see if the new rules are relevant to your situation, such as “Do you sell goods to customers in other countries via your website?” If not, the rules are not important to you. “Who are your customers?” If you are only dealing with B2B, those are not important. They only are if you have transactions with final customers. “What is your distribution model?” “Do you work with procurement centers, do you have local stocks?” The types of goods are also important, such as selling excise products like alcohol and tobacco. “Are you arranging the transport of goods to your customer?” If you are not in charge of transport and the customers come to pick up the goods, you are not in a distance selling scheme. “Do you sell your goods online via your own website or via another party such as Alibaba or other platforms?” There are a number of questions that you need to ask yourself to see if the rules are applicable to you.

The European Commission in 2016 formulated a vision to make VAT rules simpler, less fraud sensitive and better adapted to business. One of the proposals was also to simplify the rules for e-commerce resulting in the VAT e-commerce package. Companies selling goods online pay around €8,000 for VAT compliance in every member state they sell. There is a VAT gap, a loss of income for EU member states. For 2020 it was estimated that €7 billion of VAT is lost in the EU due to non-compliance with the VAT requirements for cross-border online sales. EU businesses were facing a competitive disadvantage to non-European businesses who found ways to import goods free from VAT, while EU businesses have a more regular control framework. For the telecom, broadcasting and electronically supplied services (TBE) there were already rules since 2003 requiring non-EU companies to comply with EU VAT requirements through the mini one-stop shop, that is going for a single registration in a single member state and comply with the requirements for the entire EU. It was limited in scope but also a great enabler. The scheme was extended to European businesses in 2015. The VAT Action Plan of April 2016 resulted in the e-commerce VAT proposal of the EU Commission of December 2016, which was adopted in December 2017 and entered into force on 1 July 2021. It was delayed for six months due to Covid. There is a payment service provider (PSP) proposal to close another VAT loophole when goods are not declared at their true commercial value. The EU Commission wants to included the PSPs such as Mastercard into the VAT net and share their data on what is being paid. Those rules will come into force on 1 January 2024.

Comparison of the old vs the new rules:

Old rules

Only applicable to intra-EU distance sales

Every member state had an individual threshold of €35,000 (for Belgium) or €100,000 (for some other member states)

Exceeding the threshold (or by option) required an individual VAT registration in the member state of arrival of the goods

No specific requirements for electronic interfaces

Impact of low value goods (below €22) is exempt from VAT

New rules as from 1 July 2021

Extended to distance sales of goods coming from non-EU territory (such as China)

The national thresholds have been abolished. There is one Community threshold of €10,000 in specific conditions. This is not relevant if selling from outside the EU.

An optional one stop shop (OSS) exists for both types of distance sales

Under certain conditions, electronic interfaces are assimilated with a “commissionaire” (buyer/reseller)

The import exemption is abolished. There are specific regimes for the importation, in particular for shipments with a value of maximum €150.

There are specific rules for intracommunity distance sales, where the supplier is established in the EU. If the threshold of €10,000 is exceeded, every sale is subject to VAT in the member state of arrival of the goods where the supplier needed to have a VAT registration, but this is replaced by the OSS mechanism. The same rules are applicable if you sell from outside the EU but have a fulfillment center in an EU member state but the threshold of €10,000 is not applicable. Distance sales of imported goods means that goods are for example sold from China directly to customers in the EU. Every sale is subject to VAT in the member state of arrival of the goods. IOSS is available for goods with a maximum intrinsic value of €150. Above that value there is no simplification to deal with your VAT compliance, so you need to register in all the member states where you have transactions. The import VAT exemption for low value goods has been abolished and there is a simplified electronic customs declaration.

Electronic interfaces are deemed to have purchased the goods from the underlying supplier and to have sold them to the customer. The platform should facilitate the supplies (e.g. transport or payment) and goods with a maximum value of €150 should come from outside the EU or if they are already in the EU but supplied by a non-EU vendor. Where the platform is established is not relevant. So as from 1July 2021, there are three systems: non-EU scheme (MOSS); Union scheme (OSS) and distance sales of imported goods.