VAT and lawyers: the client will pay

The new 21% VAT on lawyer fees, enacted by the government as a result of the last closed budgetary meeting (yesterday’s Le Soir), will change the relationship between lawyers (exempt up until now) and their clients whose legal fees will increase by the same percentage, in any case for those not subject to the VAT (the vast majority). This decision will have a direct effect on insurance rates, namely on auto insurance. The auto insurance companies are in the planning stages for a legal protection package option.

Wauthier Robijns, the spokesperson for Assuralia, the professional federation of insurers, guarantees that, “we will adjust the premiums accordingly. The customers will feel the effect,” he says. The legal protection sector represents €400 million in receipts. “Each company will have to calculate its own adjustments,” points out Robijns.

Gustaaf Daemen, CEO of DAS, one of the largest companies offering specialized legal protection, is of the same opinion. “We would rather impose this VAT on legal services. This will make it harder on the average citizen.” He thinks that legal protection premiums could see an increase from 7% to 15% depending on the type of contract. “If the client is subject to the VAT, we will only pay the net sum,” he explains. His company’s statistics show that “small claims” result in disbursements of between €600 and €1000. “There are also very important cases” for which legal intervention is limited to €100,000.

Two victims in criminal court, for example, informed us how their insurance worked “I had a ceiling of €45,000,” stated one of the victims. “The insurance paid my lawyer at that rate, but then my insurance company dropped me (Editor’s note: no mention made of DAS).” The other was covered for €15,000 and was satisfied. “My lawyer negotiated with my insurer. I never saw a bill.”

Thursday negotiations

According to Robert De Baerdemaeker, the president of the Order of the French and German Speaking Bar (OBFG), this government decision “will cause collateral damage” to those who are subject to legal proceedings. He adds that “everyone has the right to divorce”. He presses the importance of legal aid for those lacking means and the average citizen.

A deliberation will be initiated between the OBFG members, the minister of justice Annemie Turtelboom and insurance representatives. On the negotiating table are changes from a classic pro bono to a pooling of coverage for involvement in legal proceedings.

It would work something like health insurance, charging a small premium to guarantee access to adequate legal help. Lawyers, on the other hand, seem to prefer a plan system that would prohibit clients from using the pro bono system or the insurance providers from indulging in frivolous lawsuits that bring in large sums of money.

The 21% VAT on legal fees will be implemented only as of January 1st 2014. The lawyers are awaiting further details from the tax administration.

MARC METDEPENNINGEN

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