Belgium Announces Tax Reform Including Potential 3% Digital Services Tax

February 24, 2025

A new Belgian federal coalition government was agreed upon on January 31 after five political parties agreed on the mutual program, which includes tax reform measures. The Coalition Government Program (CGP) aims to introduce measures for enhancing economic competitiveness through green investments while maintaining research and development tax incentives.

The agreed tax reform includes changes to the direct tax system, including corporate and personal income tax amendments. Additionally, the CGP defines changes to VAT and other indirect taxes, such as excise and customs duties, energy and packaging taxes, and the possible introduction of digital services tax (DST).

Implications for VAT Regime and Introduction of DST

The coalition government agreed to temporarily lower the VAT rate for the supply and installation of heat pumps from 21% to 6% for five years. Additionally, supplies needed for demolition and reconstruction will be subject to 6%. However, the surface criterion will change from 200 to 175 square meters.

The CGP underlines a need to publish new rules relating to the lump sum deduction of input VAT on company bicycles used for business and private purposes.

Furthermore, the CGP announced the introduction of near real-time reporting for B2B transactions and transactions with registered cash registers starting in 2028. Regarding the cash register, its mandatory use will be extended to the entire hospitality sector and other fraud-prone sectors. The new Belgian government will implement some internationally applied VAT lottery systems to stimulate consumers' requests for VAT receipts and combat VAT fraud.

Regarding excise duties, the applicable rate for electricity for businesses will be lowered to the European minimum. In contrast, such responsibilities on zero-sugar drinks, tea, and coffee will be removed. Additionally, the General Customs and Excises Duties Law will be subject to review and possible amendments.

Finally, if there is no consensus on taxing digital services at the European or international level by 2027, Belgium plans to introduce a 3% DST.

Conclusion

The new Belgian coalition government wants to significantly reform the national tax system, making it more efficient and creating conditions for the national economy's growth. This would make the country more competitive at the European and global levels.

The Belgian government is expected to release further notices on proposed changes throughout 2025. The changes should take effect in 2026.

Source: Coalition Government Program, KPMG

What is Belgium’s proposed Digital Services Tax (DST)?

Belgium plans to introduce a 3% DST by 2027 if no international agreement on digital taxation is reached by then.

How will Belgium’s VAT changes affect businesses?

Businesses will see temporary reductions in VAT rates for certain sectors, including heat pump installations and demolition projects.

What is near real-time VAT reporting in Belgium?

Starting in 2028, Belgium will require businesses to report B2B and certain cash transactions almost immediately, enhancing tax compliance.

Which sectors in Belgium will be affected by mandatory cash registers?

Mandatory cash register use will expand to the entire hospitality sector and other high-risk sectors to combat VAT fraud.

What excise duty changes did Belgium announce?

Belgium will lower excise duties on electricity to the EU minimum and remove duties on zero-sugar drinks, tea, and coffee.