Notion of art, collection or antique objects

These are the goods referred to in item XXI, § 2, of table A of the annex to Royal Decree no. 20 of 20 July 1970 fixing the rates of value added tax and determining the distribution of goods and services according to these rates (see 2.1.3.1. The support of the work above).

Notion of taxable dealer

The taxable dealer is the taxable person who, in the course of his economic activity, purchases or uses for the needs of his business or imports, with a view to resale, second-hand goods, works of art, collectors’ items or antiques, whether this taxable person is acting on his own behalf or on behalf of another person under a contract of commission for purchase or sale (Article 58, § 4, 1°, of the VAT Code).

It seems to us that this definition applies to NFT exchange platforms.

Operations covered

The special scheme for taxing the profit margin shall apply to supplies by a taxable dealer of second-hand goods, works of art, collectors’ items or antiques which are supplied to him within the Community by a supplier who, at the time of purchase, intra-Community acquisition or importation of those goods, was unable to exercise any right to exemption from, or refund of, tax, provided that the supplier is :

• a non-taxable person (for example: an individual, a non-taxable legal person);

or

• another taxable person, insofar as the supply of the goods by that other taxable person is exempt from value added tax in accordance with Article 44 (2) (13) of the VAT Code (Article 136 (a) and (b) of Directive 2006/112/EC);

or

• another taxable person, insofar as the supply of the goods by this other taxable person is exempt under Article 56a of the VAT Code (Articles 282 to 292 of Directive 2006/112/EC) and relates to capital goods;

or

• another taxable dealer, provided that the supply of the goods by this other taxable dealer has been subject to value added tax in accordance with this special scheme (Article 58, § 4, 2°, of the VATCode and Article 314 of Directive 2006/112/EC).

Goods which the taxable dealer cannot establish as having been purchased from the persons referred to above are deemed to have been acquired under the normal VAT system.

Conversely, when the taxable dealer imports second-hand goods, works of art, collectors’ items or antiques, or when he purchases them under the normal VAT system from taxable persons acting as such or from other taxable dealers it is no longer justified, on the occasion of the supply of these goods, to limit the collection of the tax to the capital gain realized by this taxable dealer, as soon as the latter has been able to deduct the VAT which has encumbered the importation, the purchase or the intra-Community acquisition of the goods.

In this respect, second-hand goods, works of art, collectors’ items or antiques supplied to the taxable dealer by suppliers who have benefited from an exemption or refund of the tax (such as diplomats, international organizations, members of the Belgian Forces in Germany (decision no. E.T. 10.212 of 18.03.1994) are also excluded from the profit margin scheme.

The commentary of the VAT Code by focusing on event tickets really seems to us to be able to integrate the sale of NFTs into this favorable profit margin regime:

The profit margin scheme applies only and under certain conditions to the supply of second-hand goods, works of art, collectors’ items or antiques. The provision of services, whatever they are, are in no way covered by this particular regime.

The sale of event tickets to attend cultural, sports or entertainment events is not analyzed as a supply of goods but as a provision of servicesthat consists of the granting of the right to access these events.

However, in certain cases (in the situation where the event has already taken place or has been definitively cancelled and the ticket constitutes only a collector’s item),the sale of the event tickets is analyzed as a supply of goods and may possibly be carried out under the margin scheme by a taxable reseller, if all the conditions for the application of the margin scheme are met (decision no. E.T. 128.514 of 07.07.2015).

Tax base

For the supply of second-hand goods, works of art, collectors’ items or antiques, the taxable amount is the profit margin achieved by the taxable dealer, less the amount of value added tax relating to the profit margin itself. The latter is equal to the difference between the selling price charged by the taxable dealer for the goods and the purchase price.

Are considered as :

• selling price: everything that constitutes the consideration obtained or to be obtained by the taxable dealer from the purchaser or a third party, as well as subsidies directly linked to this transaction, taxes, duties, levies and charges, ancillary costs such as commission, packaging, transport and insurance costs, charged by the taxable dealer to the purchaser The selling price does not include sums deductible as a discount, price reductions granted by the taxable dealer to his co-contractor and acquired by the latter at the time when the tax becomes due, sums advanced by the taxable dealer for expenses he has incurred in the name and on behalf of his co-contractor.
• purchase price:everything that constitutes the consideration defined above (selling price) obtained or to be obtained from the taxable dealer by his supplier.

In the case of supplies of goods subject to the special profit margin tax scheme, the turnover is the total profit margin achieved in the course of a year by the taxable dealer on the sale of second-hand goods, works of art, collectors’ items or antiques, less the amount of VAT included in the profit margin. This assessment of the turnover is particularly important for the calculation of the annual turnover limit of 25,000 euros for the tax exemption scheme (see heading 6 of section 4).

Deductions

a. On the part of the buyer

Where the purchaser is a taxable person, he shall not be entitled to deduct from the tax for which he is liable the VAT due or paid on second-hand goods, works of art, collectors’ items or antiques supplied to him by a taxable dealer, insofar as the supply of such goods by the taxable dealer is subject to the special profit margin tax scheme.

Remark:

When a taxable purchaser, obliged to file the declaration referred to in Article 53, § 1, first paragraph, 2°, of the VAT Code, resells, for example, a motor vehicle which he has used for his taxable activity, VAT is due according to the normal rules without taking into account whether he originally purchased it with the application of the special profit margin tax regime or with the application of the normal regime (written parliamentary question n° 392 of Mr. Representative Francis Van den Eynde of 22.04.1996).

b. In the case of the taxable dealer

The taxable dealer may not deduct from the tax for which he is liable the VAT due or paid for second-hand goods, works of art, collectors’ items or antiques which are, or will be, supplied to him by another taxable dealer established in Belgium or in another Member State, insofar as the supply of these goods is subject by the vendor to the special profit margin scheme.

The administrative tolerance referred to in No. 5.3 of Decision No. E.T. 119.650 of 20.10.2011 is only intended not to subject to tax, up to 50%, the supplies of vehicles whose deduction of VAT incurred at the time of purchase has been limited as a result of the application of Article 45, § 2, of the VAT Code. This tolerance therefore does not apply in the context of the profit margin regime (written parliamentary question no. 5-7778 of Senator Yoeri Vastersavendts of 17.01.2013).

Subject to the limitations and exclusions provided for in the VAT Code, the taxable dealer may, like any other taxable person, deduct the taxes on expenses incurred for the purposes of his economic activity and entered in his input invoice. In this sense, he may also deduct taxes relating to expenses incurred in connection with goods that he subjects to the special profit margin scheme. This applies to taxes on purchases, imports and intra-Community acquisitions of goods, such as accessories, spare parts and other supplies used for the repair, overhaul and processing (see, however, heading 2, subheading A, subheading a, above) of such goods, as well as taxes on the provision of repair, overhaul, processing and appraisal services relating to such goods.

The price of these supplies of goods and services cannot be entered in the purchase register but must be entered in the incoming invoice. This price cannot be added to the purchase price of the goods as recorded in the purchase register for the calculation of the profit margin.

Billing

In the cases provided for by Article 53, § 2, first paragraph, of the VAT Code and by Article 1 of the aforementioned Royal Decree No. 1 of 29.12.1992, the taxable dealer must issue an invoice for the supplies of goods he has made. The taxable dealer may not show separately on the invoices that he is required to issue, or on any corrective document, the VAT relating to the supplies of goods that he is subject to the special profit margin tax scheme.

The invoice must also bear the following wording, depending on the case: “Special scheme – second-hand goods”, “Special scheme – works of art” or “Special scheme – collectors’ items and antiques” (article 8 of Royal Decree no. 53, mentioned above).

Terms and conditions of application of the plan

Article 58, § 4, of the VAT Code can only be applied insofar as the economic activity of the taxable dealer complies with the conditions and procedures laid down for the application of the special profit margin tax regime.

The special tax regime for the profit margin can only be applied if the taxable dealer :

• issues a purchase order to its supplier for the goods in question, unless the supplier is required to issue an invoice;
• is able to prove, by any means under ordinary law with the exception of an oath, that his supplier is one of the persons listed in Title 2, section B, and that he has not been able to exercise any right to exemption or refund of the tax paid on the purchase, intra-Community acquisition or importation of the second-hand goods that he resells to the taxable dealer;
• Maintains a record of purchases of the subject goods;
• keep a record of comparison;
• individualizes the goods he buys;
• keep separate accounts for sales of goods subject to the special profit tax regime or, if it does not keep such accounts, record such transactions in separate columns of the outgoing invoice and the revenue journal.

The Court of Justice of the European Union issued a judgment on 18.05. at the request of the Vilnius Regional Administrative Court, (Lithuania).2017 concerning the conditions for the application of the profit margin scheme, the refusal by the national tax authorities to a taxable person to benefit from the right to apply the profit margin scheme, the statements on the invoices concerning both the application by the supplier of the profit margin scheme and the exemption from VAT, the non-application by the supplier of the profit margin scheme and the indications allowing to suspect the existence of irregularities or fraud in the supply (Court of Justice of the European Union, Judgment L.U., Case C-624/15, of 18.05.2017).