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Small businesses: End of the VAT forfeit in sight

© Colours of Turkey for Unsplash

The scheme set up to allow small businesses to avoid costly and time-consuming administration is to end in 2028, the government has announced.

The forfeit system is aimed at small, usually one-person businesses like hairdressers, bakers, butchers and bar owners, and is a relic of the days when such businesses operated without electronic cash registers and the like.

The forfeit system allowed them to pay a fixed sum in VAT every quarter, rather than a sum based on their real income. In that way, they did not have to keep detailed accounts for the purposes of VAT.

For example, the owner of a small bar would be taxed on how many barrels of beer were ordered, and how many glasses of beer were obtained from each barrel. The same principle would apply to a baker and a sack of flour, or a butcher and a side of beef.

However although the system made administration easier for the trader and the tax department alike, it is open to fraud. And the government has started taking action. In 2018 the number of traders allowed to use the system was reduced, for example by disallowing fish sellers at open markets. Then, the forfeit system was limited to physical persons, and no longer to sole traders with a company structure.

Now, the system is limited to traders with a maximum annual turnover of €750,000 in one of these 13 sectors: pharmacists, bakers, cafe owners, snack bar owners, food vendors, ice cream vendors, hairdressers, newsagents, small textile merchants, food stores, shoe repairers, butchers and dairy sellers.
“Today, about 6,000 businesses still pay a flat-rate VAT,” Loïc Van Staey of the self-employed organization Unizo told De Tijd.

Between 2012 and 2018, the number of users halved, and since then it has continued to decline. This is partly because the new economic code, which came under the previous federal government, stipulates that all self-employed persons must keep accounts.”

And following the political principle of death by a thousand cuts, the government – under the aegis of finance minister Vincent Van Peteghem (CD&V) – has announced the system is to end in 2028. In the meantime, no-one who is not already inside can enter as of the end of this year.

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