Belgium set to invalidate law firm tax circularVAT: Brussels backs down over forcing firms to de-registerThe Belgian government is set to complete its climbdown over forcing European law firms to de-register for VAT, which would effectively have increased costs for UK practices and others by 21%.Rumours in Brussels say Belgian finance minister Didier Reynders is to announce that a tax circular distributed at the start of 2001 requiring EU firms to de-register should not apply.The move was originally made with the aim of placing EU firms on a level playing field with Belgian practices, many of which are small and VAT exempt to keep down the costs of access to justice.While they united with the Law Society to lobby against the circular, City firms have taken different approaches.Some, such as Slaughter and May, considered themselves obliged to de-register but have subsequently been able to re-register as the validity of the circular came under increasing scrutiny (see [2001] Gazette, 3 May, 6).

Others, such as Taylor Joynson Garrett (TJG), decided not to de-register and instead argued the case.Jane Golding, head of TJGs Brussels office, said the change is contrary to single market principles as well as the EUs harmonised VAT regime.

We are standing firm and pursuing the argument, she said.Ms Golding added that de-registering would impact on UK firms ability to compete with US firms which are not affected rather than Belgian firms, with whom there is little competition.Neil Rose