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Implementation of the Establishment Directive in Belgium sparks heated tax debate
The issue of whether non-Belgian EU law firms should be exempt from paying VAT on their services has been raised again following Belgium's implementation of the Lawyers' Establishment Directive. Plans by the Belgian government to make all non-Belgian EU law firms VAT-exempt were temporarily abandoned last year after a successful lobbying campaign. But now the issue has resurfaced because the Belgian government has published legislation implementing the directive. June O'Keefe, a member of the Law Society's Brussels office, said: "We've now heard that because the Establishment Directive has been implemented, the government wants to put all EU lawyers on the same footing as Belgian lawyers. "Most firms want to be able to charge VAT because they want to recover it. It makes a big difference to overall profitability." Such a ruling would mean that although law firms do not have to charge their clients VAT on their services, they would have to absorb any VAT costs on overheads. The VAT exemption means that although fees can be kept down, overall costs are increased. In addition, such a ruling would not place EU firms on a level playing field with firms from outside the EU. O'Keefe said: "Lawyers want at least to have the option. They don't want to be compelled into not paying VAT." The Law Society's new head of international Alison Hook will be meeting solicitors in Belgium today (4 February) to discuss the directive and the VAT issue. The Law Society will then decide whether or not to press ahead with a lobbying campaign. One option is to push for a more flexible system differentiating private client and commercial work. "It's possible that Belgian lawyers would also like to have the option of paying VAT," said O'Keefe.