Introduction
Belgian tax procedures vary slightly depending on the type of tax. However, a common feature of Belgian tax procedures is that there is no fee or cost due to the tax authorities or to the courts. The taxpayer may defend itself before the tax authorities and the courts, and thereby avoid paying fees to counsel.
Tax procedures may be slow. The tax authorities may revisit taxpayers' files after several years, administrative appeals may take several months and many courts are under-resourced. Nevertheless, most misunderstandings are swiftly settled at the stage of an administrative procedure organised as a series of open discussions where the taxpayer has access to the tax authorities' files.
Special services have been organised within the tax authorities to serve as intermediaries between taxpayers and the services in charge of assessing taxes. The Ruling Commission was created to prevent disputes, while the Tax Conciliation Service was created to assist taxpayers in tax disputes.
This chapter focuses on income tax disputes and the procedure organised by the federal legislation.
Commencing disputes
i Audit of the taxpayer's situation
Most taxes are assessed based on tax returns filed by taxpayers.2 In the absence of a timely return, the taxpayer must demonstrate the exact amount of income (Article 352 of the Income Tax Code 1992 (CIR1992)). Furthermore, proportional surtaxes apply (Article 444 CIR1992). In addition, a taxpayer subject to corporate tax is taxed on a minimum tax base of €47,800. If the infringement is repeated, the latter amount may be increased up to €95,600 (Article 342 CIR1992).
Tax disputes most often commence with a review of tax returns. Any means of evidence, including minutes drawn up by the tax authorities' agents3 but excluding an oath, may be used (Article 340 CIR1992).
The tax authorities may investigate the taxpayer's situation for a period of three years (or four years in the absence of a timely tax return) from the beginning of the assessment year.4 The tax authorities are allowed to review during six year semi-complex tax returns (which is the case when the taxpayer:
- files transfer pricing reports;
- reports payment to noncooperative countries or low tax jurisdictions;
- has cross-border arrangements under Directive 2011/16/EU on Administrative Cooperation (DAC); and
- requests a withholding tax relief based on a double tax treaty, the Parent-Subsidiary Directive or the Interest-Royalty Directive or the foreign tax credit).
They are allowed to review for 10 years complex tax returns (which is the case when the taxpayer is involved in hybrid structures, CFCs or structures subject to the Cayman tax). The investigation period is suspended pending the review of a complaint filed during this period for six months at a maximum. Furthermore, the investigations may be conducted for 10 years, provided that the authorities first notify the taxpayer in writing about its presumption of a wilful attempt to defeat or evade tax, based on indicia, related to the period under examination (Article 333 CIR1992). The taxpayer must also be notified when the authorities request information from other persons.5 However, the consultation of databanks does not qualify as an investigation.6 Such a notification is not requested when the investigations are conducted to satisfy a foreign country's request for exchange of information (Article 333 CIR1992).
If the authorities receive information from a foreign country under an exchange of information instrument, they are allowed to further investigate for the purposes of establishing that the taxpayer omitted to report income that should have been reported within the five-year period before the year during which the information from the foreign country has been made available to them. They may do so for two years after the day on which they receive the information from abroad (Article 333/2 CIR1992).7
The tax authorities are also allowed a one-year extension to investigate on withholding tax on income from movable property or on pay as you earn (PAYE) from the time an investigation shows that the taxpayer misapplied that tax once over the previous five years (Article 333/3 CIR1992).
If a taxpayer files a complaint against a tax bill, the tax authorities may also conduct further investigations for the purposes of deciding on the taxpayer's grievances (Article 374 CIR1992).
Investigations may thus be conducted long after the 10-year period during which taxpayers must keep their books (Article 315 CIR1992).
The tax authorities may request that the taxpayer show them any document necessary to determine its tax liability (Article 315 CIR1992). The tax authorities may require the taxpayer to supply information within one month; they may allow a time extension (Article 316 CIR1992). Taxpayers who keep data in a computerised system must deliver such information in the form that the tax authorities require (Article 315 bis CIR1992).8
The tax authorities may also access the premises where the taxpayer conducts a business during business hours (Article 319 CIR1992). The right to access the premises cannot lead to a raid.9 Access to other premises requires the authorisation of a judge (Article 319 CIR1992).10
The tax authorities may keep the taxpayer's books and documents that they deem necessary to determine the amount of taxable income. They are not allowed to take books that are not closed (Article 315 ter CIR1992).
Information obtained on the audit of a taxpayer may be used for the purpose of taxing other taxpayers (Article 317 CIR1992).11 The tax authorities may also request from any taxpayer information deemed necessary to determine the tax liability of any other taxpayer (Article 322 CIR1992). They may require bulk information on transactions of persons and groups of persons directly or indirectly involved in such transactions (Article 323 CIR1992). The tax authorities may request a judge to impose a civil fine on a person who does not cooperate with their investigations (Article 381 CIR1992).
Investigations may be conducted upon request of another country's tax authorities, pursuant to a treaty or DAC.12
In principle, information requested by or provided to foreign countries is not disclosed to the taxpayer before the investigation by the foreign country is closed (Article 337/1 CIR 1992).
If investigations show the existence of the preparation of fraudulent mechanisms, the tax authorities may request to see the records of a bank (Article 318 CIR1992). They may also request information from a bank with the purpose of taxing targeted customers if they identify signs of fraud or intend to impose a tax based on signs of wealth, unless the taxpayer (who must be informed of the intent to proceed with bank investigations) provides the requested information within one month.13
For the purposes of satisfying a request from another country, the tax authorities may investigate banks' files provided they notify the taxpayer within 90 days after the exchange of information unless the other country explicitly requests not to inform the taxpayer or if the other country demonstrates that it has already notified the taxpayer (Article 333/1 CIR1992).14
In criminal matters, pieces of evidence obtained irregularly cannot be set aside unless the irregularity affects the reliability of the evidence or the right to a fair trial or if compelling formalities have been disregarded (Article 32 of the Criminal Procedure Code). The Supreme Court has expanded this rule to pieces of evidence obtained by the tax authorities and used to establish a tax.15
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Footnotes
1. Caroline P Docclo is of counsel at Loyens & Loeff.
2. Income tax returns must be filed within the six-month period following the closing of the relevant period. The calendar year is the relevant period for determining liability for individual tax. The fiscal year to which the annual financial statements of companies and other separate legal entities relate corresponds to the period over which their liability to corporate tax or to not-for-profit organisation tax is determined.
3. The minutes of a VAT audit may be used to build presumptions for income tax purposes (see Cass., 21 June 2012).
4. The assessment year is the year during which the tax situation of the taxpayer is determined. This is the current calendar year with respect to withholding taxes; the year following the relevant period with respect to individual tax; and the year during which the fiscal year ends if it ends before 31 December, or the year thereafter if the fiscal year ends on 31 December.
5. Cass., 20 May 2016.
6. Cass., 12 February 2016.
7. Seven years in case of wilful attempt to defeat or evade tax.Income wrongly reported as exempted is assimilated to unreported income (Cass., 24 March 2023; Cass., 30 November 2023).
8. This also applies to information kept abroad.
9. Cont. Court, 12 October 2017.
10. See Cont. Court, 27 June 2019.
11. As an exception to this rule, information collected in a bank's books when examining that bank's tax situation must not be used to tax that bank's customers, unless a fraud mechanism is detected (Article 318 CIR1992).
12. DAC has been implemented in Articles 338 to 338ter CIR1992. DAC6 has been implemented in Article 326/1 et seq CIR1992.The Constitutional Court annulled the implementation of DAC 6 insofar as attorneys-at-law cannot invoke the client-attorney privilege (Cont. Court, 15 September 2022; Const. Court, 11 January 2024).
13. Banks must spontaneously provide information on their customers' accounts to the National Bank. The tax authorities may also have access to this information. The tax authorities may also have access to the UBO register (Article 322 CIR1992).
14. For the purposes of DAC, the tax authorities have access to information covered by the Money Laundering Directive (Article 338ter CIR1992).
15. Cass. 22 May 2015; Cass., 4 November 2016; Cass., 10 February 2017; Cass., 18 January 2018; see also the bill of 23 June 2022, Doc,House, 55 2783/001.
Originally published by Lexology.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.