The new CAC and VAT
Recently the VAT authorities published a circular letter explaining the impact of the new Companies and Associations Code (CAC) on VAT. More in particular it concerns the VAT consequences of the new meaning the CAC gives to the partnership and de facto association.
This legal concept is changed significantly by the CAC. Under the new legislation, the partnership is a company with a civil or commercial goal without legal personality. The partnership is defined as a contract whereby two or more persons commit to contribute commonly, with the objective to share the financial gains which are directly or indirectly generated. It is entered into in the common interest of all parties.
If the partnership is managed by one or more directors, whether partners or not, which act in their own name, this is considered as a 'silent partnership'. There is a separated capital, but the directors act in their own name without committing the other partners. A silent partnership is not considered as a VAT payer in the sense of article 4, § 1 of the VAT Code.
If the partners agree that their 'partnership' should have legal personality, they do not establish a partnership but a general partnership (vennootschap onder firma) or a limited partnership (commanditaire vennootschap).
In a general partnership, all partners are joint and unlimited liable for the commitments of the company.
On the contrary, in a limited partnership, one or more partners are joint and unlimited liable for the commitments of the company (these are the liable partners), while one or more other partners are limited to their contribution in cash or in kind and do not participate in the management (limited partners). In both cases the company has legal personality and is considered as a VAT payer in the sense of article 4, §1 of the VAT Code.
Opposite to the silent partnership there is the 'public partnership' where the partners act externally as a whole. Such partnerships are for VAT purposes also considered as VAT payer in the sense of article 4, §1 of the VAT Code.
De facto association
Under the new CAC an association is established by two or more persons, called members. As association has an altruistic goal in the framework of one or more activities it has as objective. It cannot provide its founders, the members, the directors or any other person with any financial benefit, except for the altruistic goal provided for in the articles of association. It has no legal personality.
The de facto association as currently described in the CAC can only pursue an altruistic goal. Economic activities in the sense of article 4, §1 of the VAT Code are allowed, but only aimed at the altruistic goal.
Notwithstanding these limitations, a de facto association is always considered as a VAT payer in the sense of article 4, §1 of the VAT Code.