Ordinarily, a mixed taxable person uses a general pro rata figure to determine the right of deduction.

This general pro rata figure is determined as follows:
(Amount of transactions with right of deduction)/(Amount of all economic transactions (with and without right of deduction))

The mixed taxable person may only deduct the VAT on the goods and services used for his or her economic activity on a pro rata basis corresponding to this fraction.

In which cases can a mixed taxable person exercise their right to deduct on the basis of the general pro rata figure?

1. Choice made by the mixed taxable person.

You can choose to apply yourself the right to deduct on the basis of the general pro rata figure. In order to do this, you will need to submit prior notification.

2. The administration requires the taxable person to apply the general pro rata.

This will be the case when the administration considers that the deduction according to the actual use does not correspond or no longer corresponds to reality.

In this case, we will notify you of the refusal stating the reasons thereof no later than 31 December of the year following the one during which your notification of the application of the actual use was effective. The decision is valid for an indefinite period from the first day of the reporting period during which you made the notification.

How do I report the application of the deduction based on the general pro rata?

To do this, you must submit an electronic advance notification via the e604A (commencement of VAT activity) or e604B (change in VAT activity) return.

Enter the declaration:

• before the end of the reporting period during which you start your business.
• before the end of the reporting period in which you become a mixed taxable person by changing your activity.

The notification is valid for an indefinite period. You only need to submit it once.

Application of the scheme begins:

• as soon as you start your business if you start your business.
• as soon as the activity changes if you become a mixed taxable person by changing your activity.

If you apply the deduction scheme according to actual use, this scheme is applicable at least till 31 December of the third year following the effective date of the notification. This means that you can apply the general pro rata at the end of this 3-year period, by submitting a notification in which you opt for the general pro rata via an e604B declaration (change of VAT activity). This is effective as from 1st January of the year following notification.

If you wish to put an end to the general pro rata deduction scheme, submit before the deadline a prior notification via an e604B declaration (change of VAT activity) in which you opt for actual use.  This is effective as from 1st January of the year following notification.

The general pro rata deduction scheme is automatically terminated if you cease to be a mixed taxable person via an e604B declaration (change of VAT activity) or if you cease your activity altogether via an e604C declaration (cessation of activity).

Examples:

• You start reporting on a quarterly basis on 10 April 2024 and you choose to apply the general pro rata deduction. You can apply the general pro rata rule from 10 April 2024 by submitting an e604B declaration no later than 30 June 2024. You can already opt for the general pro rata scheme in the e604A return.
• You report on a monthly basis and you start an additional activity on 15 April 2024 for which the general pro rata deduction is appropriate. You will submit an e604B declaration for this purpose no later than 30 April 2024. You apply the general pro rata from 15 April 2024.
• You are a mixed taxable person and you apply the deduction according to the actual use rule since 1^st January 2023. You must apply it until at least 31 December 2026. If you submit an e604B before 31 December 2026 to switch to general pro rata, you will be able to apply general pro rata from 1^st January 2027. If you submit the e604B return in 2027, you will be able to apply the general pro rata from 1^st January 2028.
• You are a mixed taxable person reporting on a quarterly basis and you apply the deduction on a general pro rata basis. You want to put an end to it in 2024. Before 31 March 2024, you must submit an e604B declaration in which you opt for actual use.  You will be able to apply the actaul use from 1^st January 2024.

Can a notification of deduction on the basis of the general pro rata be refused?

We do not provide explicit authorisation for the application of the general pro rata deduction. However, we can refuse this application at a later date if the deduction on the basis of the application of the general pro rata rule results in inequalities in the application of the tax. The administration then requires the taxable person to apply the actual use rule.

What information do you need to provide in addition to the notification of deduction on the basis of the general pro rata?

Every year, you must report the final general deduction pro rata for the previous calendar year. This pro rata is based on the reality of your transactions at the end of the past year and acts as the temporary general pro rata that you apply during the current calendar year. The following year, this general pro rata is permanently fixed and constitutes the temporary general pro rata for the current year, and so on.

If you do not have a reference for the previous year (especially when you are starting up your business), you can temporarily estimate the general pro rata based on your operational forecasts.

You must communicate annually the final and temporary general prorata via Intervat, when filing the periodic VAT return relating to the first quarter (on 20 April at the latest) or relating to one of the first three months of the current calendar year (on 20 February, 20 March or 20 April at the latest).

Any revisions to deductions are made in this periodic return. If the final general pro rata is higher than the temporary general pro rata applied the previous year, and if this is the case during the first two months of the current year, you can make an additional deduction equal to the difference between the deduction calculated according to the final pro rata and the one calculated according to the temporary pro rata. If this is not the case, you must refund an amount of tax equal to the difference recorded.

If you apply the general pro rata during the calendar year since you become a mixed taxable person, you must provide this information on the basis of forecast for the next 12 months after the start or change of activity, when submitting the periodic VAT return relating to the quarter during which the start or change of activity takes place or relating to one of the first two months following the start or change of activity.

Are you already applying the general pro rata deduction scheme on 31 December 2023?

If you are already applying the general pro rata deduction scheme on 31 December 2023, you must confirm to the FPS Finance that you will continue to apply this scheme.

You must do so by submitting the e604B declaration (change of VAT activity) via the e604 application before 1 July 2024.

Under the heading “Régime” (Scheme):

• select “assujetti mixte/mixed taxable person” and then “prorata général/general pro rata”,
• enter 31/12/2023 as the date,
• don't forget to select a tax scheme further down the screen (e.g. reporting on a quarterly basis).
  

You must also include the final and temporary general pro rata in the periodic VAT return relating to the first quarter of 2024 (no later than 20 April 2024) or no later than in the periodic VAT return relating to March 2024 (no later than 20 April 2024).

The mixed taxable person may also exercise their right of deduction on the basis of the actual use made of the goods and services received. The VAT reduction is then mainly determined by the distribution of costs between the various business sectors.

What costs?

If the mixed taxable person exercises his or her right of deduction on the basis of actual use, he or she must distinguish between three types of purchases:

• Purchases for transactions entirely subject to VAT
  The VAT on these purchases may be deducted in full, unless there is a statutory restriction of deduction (e.g. maximum of 50% deduction for costs relating to passenger cars or no deduction of reception costs, etc.).
   
• Purchases for transactions entirely exempt from VAT
  The VAT on these purchases may not be deducted.
   
• Purchases used for both taxed and exempt transactions
  For these purchases the mixed taxable person will have to determine special pro rata figures based on the allocation of the purchases to taxed and exempt activities. The VAT on the purchases may then be deducted proportionately in line with these special pro rata figures (e.g. on the basis of area).
  A special pro rata figure that is determined in the same way as the general pro rata figure can possibly be used, unless the administration explicitly objects to this.
   

In which cases can a mixed taxable person exercise their right to deduct on the basis of the actual use?

1. Choice made by the mixed taxable person.

You can choose to apply the right to deduct yourself on the basis of the actual use. In order to do this, you will need to submit prior notification.

2. The administration requires the taxable person to apply the actual use rule.

It will be the case when the deduction on the basis of the application of the general pro rata rule results in inequalities in the application of the tax. This may be an individual decision for a particular taxable person (by registered letter) or for a particular sector of activity or group of taxable persons (by circulaire).
 

How do I report the application of the deduction based on the actual use?

To do this, you must submit an electronic advance notification via the e604A (commencement of VAT activity) or e604B (change in VAT activity) return.

Enter the declaration:

• before the end of the first reporting period of the current calendar year, if you already are a mixed taxable person (i.e. before 31 January for a person reporting on a monthly basis, and before 31 March for a person reporting on a quarterly basis)
• before the end of the first declaration period in which the start or change of your activity takes place, if you become a mixed taxable person by starting or changing your activity.

The notification is valid for an indefinite period. You only need to submit it once.

Application of the scheme begins:

• on the first of January of the relevant calendar year if you already are a mixed taxable person.
• as soon as you start or change your activity if you become a mixed taxable person by starting or changing your activity.

The scheme is applicable at least till 31 December of the third year following the effective date of the notification. Except if you stop being a mixed taxable person via an e604B declaration (change of VAT activity) or if you stop completely your activity via an e604C declaration (cessation of activity): in these cases the deduction scheme according to actual use automatically comes to an end.

If, at the end of this 3-year period, you wish to end the deduction scheme according to actual use, submit prior notification via an e604B declaration (change of VAT activity) in which you opt for the general pro rata. This takes effect from 1 January of the year following notification.

Examples:

• You are a mixed taxable person reporting on a monthly basis and you choose to apply the deduction according to the actual use rule. You will submit an e604B declaration for this purpose no later than 31 January 2023. You must apply the actual use from 1 January 2023 until at least 31 December 2026.
• You are a mixed taxable person reporting on a quarterly basis and you choose to apply the deduction according to the actual use rule. You will submit an e604B declaration for this purpose no later than 31 March 2023. You must apply the actual use from 1 January 2023 until at least 31 December 2026.
• You report on a monthly basis and you start an additional activity on 15 April 2024 for which the general pro rata deduction is appropriate. You will submit an e604B declaration for this purpose no later than 30 April 2024. You must apply the actual use from 15 April 2024 until at least 31 December 2027.
• You start reporting on a quarterly basis on 10 August 2024 and you choose to apply the deduction according to the actual use rule. You can apply the actual use rule from 10 August 2024 by submitting an e604B declaration no later than 30 September 2024. You can already opt for the actual use scheme in the e604A declaration.
   

Can a notification of deduction on the basis of the actual use be refused?

We do no longer provide explicit authorisation for the application of the deduction according to the actual use rule. However, we can refuse this application at a later date if we consider that the deduction according to the actual use does not correspond or no longer corresponds to reality.

In this case, we will notify you of the refusal stating the reasons thereof no later than 31 December of the year following the one during which your notification was effective. The decision is valid for an indefinite period from the first day of the reporting period during which you made the notification.
 

What information do you need to provide in addition to the notification of deduction on the basis of actual use?

You must communicate annually certain information relating to the application of the right to deduct according to the actual use. You must do this every year via Intervat, when filing the periodic VAT return as regards:

• The first quarter ( at the latest on April 20^th) or
• To one of the first three months of the current calendar year (on 20 February, 20 March or 20 April at the latest).

Provide information on :

• the definitive general deductible pro rata for the previous calendar year (if you applied the general pro rata on the previous calendar year) 
• for the previous calendar year, the proportion, expressed as a percentage, of the tax charged on the transactions:
  • which are exclusively allocated to the business sector(s) whose transactions give rise to full deduction of the tax
  • which are exclusively allocated to the business sector(s) whose transactions do not give rise to a right to deduct tax.
  • which are simultaneously allocated to both types of operational sectors.
• Specific pro rata

If you benefit from the application of the actual use during the calendar year since you become a mixed taxable person, you must communicate this information on the basis of forecast for the next 12 months after the start or change of activity, when submitting the periodic VAT return relating to the quarter during which the start or change of activity takes place or relating to one of the first two months following the start or change of activity.

If you were already applying the actual deduction scheme according to actual use on 31 December 2022, you must include this data relating to the year 2023 in the periodic VAT return relating to the first quarter of 2024 (on 20 April 2024 at the latest) or no later than in the periodic VAT return relating to May 2024 (on 20 June 2024 at the latest).

What happens in the event of late notification of a deduction on the basis of actual use or late communication of information?

If you do not submit the prior notification and/or communication within the time limit prescribed, you will only be able to exercise the right to deduct according to the actual use from 1 January of the following calendar year, provided that you submit a new notification within the time limit.