VAT treatment of your membership fees: Individual decision of the VAT authorities is possible

The Belgian and EU legislation foresee in a VAT exemption for the supply of services by non-profit organizations with aims of e.g., a trade-union nature, for the collective benefit of their members in return for a membership fee that is fixed according to their statutes, and to the extent that it is not likely to cause distortion of competition (art. 44, §2, 11° Belgian VAT Code).

The Belgian VAT authorities have in the past already commented on this VAT exemption in their Circular Letter E.T.121.844 and have recently (September 2022) also updated the Belgian VAT comments.

One of the conditions to apply this VAT exemption is that the main aim of the organization is to defend the collective interests of its members and to represent them vis-à-vis the appropriate third parties, in particular with the aim of influencing the policies and decision-making processes of these third parties.

The authorities have in this respect taken the position that in order to reach its representation goal towards third parties, it could be required for the non-profit organization to organize studies, meetings, etc. to prepare the negotiations with the third parties and to inform its members on the developments and results. Such activities are then considered as ancillary to the main goal of representation and benefit from the VAT exemption. On the other hand, in case the services of the non-profit organization mainly relate to the enhancement of the economic and commercial benefit of its members (e.g., advising, organizing trainings, networking between members), the VAT authorities clearly indicated that the VAT exemption could not be applied.

In practice we see that it is unfortunately not always easy to determine whether the main goal of a non-profit organization is indeed the defense and representation of its members toward third parties, with the aim of influencing the policymaking, leaving associations with uncertainty about the correct VAT treatment of their membership fees.

In their updated VAT comments, the Belgian VAT authorities clarified that when the non-profit organization pursues different goals, without it can be shown that one goal is more important than the other, there is a possibility to split up the membership fees and partially subject the membership fees to VAT. The Belgian VAT authorities do however stress that such a situation should be assessed on a case-by-case basis and is thus subject to the explicit approval of the authorities. If such a split is applied, the organization would become a mixed VAT-taxable person with a partial right of VAT deduction.

It thus remains very important to correctly assess the VAT treatment of the membership fees and in order to avoid future discussions at the moment of a VAT audit -and in a worst-case scenario face a VAT claim- it can be considered to obtain an individual decision of the authorities for your specific case. EY Law and EY would of course be pleased to assist you in this regard.

Of course, when establishing the VAT-status of your non-profit organization, it would be advisable, in order to avoid any discussions during e.g., a VAT audit, to obtain confirmation from the VAT authorities.

Should you require our assistance with your VAT obligations and formalities or regarding specific non-profit questions please do not hesitate to contact us.