Coalition agreement includes €2.1 billion VAT and excise rises
The pending Belgian government coalition agreement includes VAT and customs rate rises adding up to €2.1 billion. This would fill Belgium’s large budget deficit, which was 4.4 percent of GDP in 2023 — far above the mandated 3 percent EU threshold.
Also contained within a wide tax reform is consolidation of Belgian reduced VAT rates, to amalgamate the 6% and 12% rates into a new, 9% rate.
Talks on forming a federal government has recently broken down and are in mediation. The Flemish negotiations leaders have been unable to find agreement on the budget and taxes between a proposed five party coalition. The parties are attempting to find ways to reduce the national deficit of €20 billion prior talks with the European Commission on Euro currency rules on 20th September.
With the proposed agreement are rises from the existing reduced 6% rate for:
- Milk
- Bread; and
- Meat.
But fruit and vegetables would drop to zero percent VAT rate.
Discussions have broken down partially because of disagreements on a capital gains tax measure and doubts about the VAT rise.
Read more in our Belgian VAT guide.
Belgian VAT rates and compliance
Belgium’s VAT (Value Added Tax) system is a consumption tax applied to goods and services. The standard VAT rate in Belgium is 21%, which applies to most goods and services. However, there are reduced rates for specific categories:
- 6% VAT applies to essential goods and services, such as food, water, medicine, books, and certain housing-related activities (e.g., renovation and maintenance);
- 12% VAT covers specific sectors like restaurants, social housing, and certain construction services.
- Certain services, like education, healthcare, and banking, are exempt from VAT.
Businesses in Belgium must register for VAT if their taxable turnover exceeds a certain threshold, and they must file periodic VAT returns, typically quarterly or monthly. VAT is collected by the seller and paid to the government, and businesses can deduct VAT paid on purchases from the amount they owe, ensuring the tax burden falls on the end consumer.
