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What is the relevant legislation relating to tax administration and controversies? Other than legislation, are there other binding rules for taxpayers and the tax authority?
The relevant legislation is codified in the Income Tax Code (special codes exist for inheritance taxes, registration duties and VAT), which establishes the rules governing the determination of taxes and the procedure for the assessment of taxes.
The Flemish Region has its own tax code, covering all taxes.
The general principles applicable in Belgian tax law flow from the Belgian Constitution and from the law in general.
Tax law must comply with:
- the Belgian Constitution;
- international treaties; and
- European legislation.
According to the legality principle (article 170 of the Constitution), no tax for the benefit of the state may be waived except by way of a law.
Royal decrees supplement the Income Tax Code and the Belgian tax authorities publish guidelines, but for information purposes only.
A dedicated service of the Belgian tax authorities, the SDA, can issue formal rulings on the assessment of a given situation. These advanced rulings are binding.
What is the relevant tax authority and how is it organised?
The Finance Federal Public Service (Finance FPS) forms part of the Ministry of Finance and falls under the responsibility of the Minister of Finance.
The Finance FPS is divided into different general authorities:
- General Administration of Taxes;
- Tax and Tax Collection;
- Special Tax Inspectorate;
- Customs and Excise;
- Patrimonial documentation; and
The general administration is geographically organised.
The SDA (the ruling commission) is an autonomous department of the Finance FPS, where taxpayers can secure a ruling in advance.The SDA will give a written opinion on the tax effect of a contemplated transaction and will stick to the opinion provided that the relevant facts have been fairly presented.
Within the Finance FPS, there are centres specially dedicated to large companies. These fall into two types:
- The seven ‘big business’ centres. These deal with all aspects of taxation. It is no longer the type of tax (VAT or corporation tax) that determines the organisation of services, it is the company itself that is the starting point of these centres.
- The Large Companies Management and Specialised Controls Centre. Within this, the sector coordination division acts as a single point of contact for large companies and the management division is, among other things, responsible for the processing of returns and for the control and the treatment of litigation in five specific fields:
- the sector of specific activities;
- transfer pricing;
- VAT units;
- tax shelter; and
- various taxes.
Compliance with tax laws
How does the tax authority verify compliance with the tax laws and ensure timely payment of taxes? What is the typical procedure for the tax authority to review a tax return and how long does the review last?
All taxpayers subject to individual income tax, corporate income tax, legal entity tax and, subject to certain exceptions, non-resident income tax must file a tax return on a yearly basis. Assessment for income tax purposes is made on the basis of the income and the other data contained in the tax return, unless the tax authorities find these elements to be incorrect.
Upon request by the tax authorities, the taxpayer must communicate all books and documents needed to determinate the amount of taxable income within a month.
This investigative power granted to the tax authorities may be exercised without notice during the three-year period starting on 1 January of the assessment year for which the tax is owed.
An additional four-year period applies if the tax authorities inform the taxpayer in writing of evidence of fraud.
If the tax authorities intend to rectify a tax return file, a notice of deficiency must be sent to the taxpayer indicating the income or the data which the tax authorities intend to substitute for those reported by the taxpayer.
The taxpayer must reply in writing to the notice of deficiency within a month. Extensions of that term may be granted if justified. In the absence of a reply from the taxpayer within the term, the tax authorities may proceed to an assessment ex officio.
The taxpayer must indicate in his or her reply whether he or she agrees with the amendment suggested by the tax authorities.
If the tax authorities are not convinced, they must send a notice of taxation that states any supplementary tax bill and explains the reason for the decision and they may then proceed to the amendment of the tax return and to the subsequent tax assessment.
Claims against assessment are submitted to the locally competent director of taxes. Claims must be filed six months after the assessment date.
Upon request, the claimant may be granted access to the file. The director’s decision must be notified and justified to the taxpayer.
If the director does not agree with the taxpayer’s arguments and therefore rejects the claim, the taxpayer can appeal the decision before the Court of First Instance (judicial procedure) within three months of the decision.
Types of taxpayer
Are different types of taxpayers subjected to different reporting requirements? Can they be subjected to different types of review?
The documents that have to be reported in attachment to the tax returns may differ whether the taxpayer is a corporate entity or an individual.
Corporate entities must attach their balance sheet and profit and loss account to their corporate income tax return.
In line with guidance provided by the OECD under Action 13 of the base erosion and profit shifting (BEPS) project, Belgium introduced transfer pricing documentation requirements in 2016. Belgium thus moved from an era when no transfer pricing documentation was required (unless requested in the context of a tax audit) to a formal transfer pricing documentation regime that includes the electronic filing of documentation.
Individuals must disclose in their tax returns existing bank accounts, insurance contracts and legal entities or trusts held abroad.
The form of the tax return is determined annually by a royal decree which is published in the Official Journal. Different forms exist for individual income tax, corporate income tax, legal entity tax and non-resident income tax. There are special forms for the payment of personal withholding tax, professional withholding tax and such like.
What types of information may the tax authority request from taxpayers? Can the tax authority interview the taxpayer or the taxpayer’s employees? If so, are there any restrictions?
On request by the tax authorities, the taxpayer must provide all books and documents needed to determine the amount of taxable income. For corporate taxpayers, this obligation extends to the registers of the shareholders and bondholders and to the attendance list of the general shareholders meetings. The information so received may also be used in order to tax third persons.
The tax authorities, if holding a mandate, have the right to access without prior notice the taxpayer’s professional premises at any time of the day.
Access to the inhabited private premises can only occur between 5 am and 9 pm and requires the prior authorisation of a Police Judge.
In order to assess taxes due by a taxpayer, the tax authorities may request written testament from third parties; they may also request from a third party any information considered to be essential for the establishment and the collection of the tax due. They may proceed to investigations involving third parties and to hearings of third parties, including employees.
In a recent decision, the Constitutional Court ruled on the topic of dawn raids carried out by the tax authorities, following a preliminary referral. The Constitutional Court was asked whether the tax authorities’ broad interpretation with regard to dawn raids could be reconciled with the right to privacy and the ‘inviolability of the home’, as protected by articles 15 and 22 of the Belgian Constitution and article 8 of the European Convention on Human Rights.
The Constitutional Court ultimately decided that the relevant legal provisions do not violate the right to privacy and the inviolability of the home. It did however set out some boundaries, making it clear that the tax authorities do not have an unconditional and unlimited right to access and search the professional premises of a taxpayer. The court recalls that the right to privacy and the inviolability of the home are fundamental rights that apply to both individuals and legal entities.
Furthermore, the Constitutional Court accepts that a dawn raid constitutes an interference with these rights. Such interferences are only allowed when they have a sufficiently clear legal basis, respond to a pressing social need and are proportionate to the aim pursued.
Available agency action
What actions may the agencies take if the taxpayer does not provide the required information?
If the taxpayer does not provide the requested information, the tax authorities may use the ex-officio assessment, which implies the burden of proof being shifted from the tax authorities to the taxpayer.
Penalties can be imposed; criminal sanctions can also apply in the event of an opposition to a tax audit.
Protecting commercial information
How may taxpayers protect commercial information, including business secrets or professional advice, from disclosure? Is the tax authority subject to any restrictions concerning what it can do with the information disclosed?
Tax authorities may not proceed to a ‘fishing expedition’. Belgian law provides particular conditions for information requested to financial institutions (banks and insurance companies) about their clients.
If a person approached by the tax authorities invokes the existence of a professional secrecy duty, the tax authorities may require the intervention of the competent disciplinary authority, which would be asked to determine whether and to what extent the requested information or presentation of books and records may be deemed to be compatible with the professional secrecy duty invoked.
It is generally accepted that persons bound by professional secrecy obligations are those referred to in article 458 of the Belgian Criminal Code, which provides that:
Doctors, surgeons, health officers, pharmacists, mid-wives and all other persons who, either by profession or otherwise, have knowledge of confidential information, will be punished if they reveal the confidential information, except in instances when they are called to testify in court and when they are obliged by law.
Tax officials are under a duty of confidentiality:
Whoever intervenes, in any capacity whatsoever, in the application of tax laws or who has access to the offices of the administration in charge of the establishment, or that in charge of the collection and collection, income taxes, is bound to keep, outside the exercise of his functions, the most absolute secrecy with regard to all that he has become aware of as a result of the performance of his mission.
They may however transmit information to other authorities provided that they are necessary for the performance of their mission, which needs to be verified case by case.
Limitation period for reviews
What limitation period applies to the review of tax returns?
As a general rule, the tax return can be audited during the taxable period. Furthermore, the tax return can be audited by the tax authorities, ‘without notice’, during the three years from 1 January of the tax year.
Where there is ‘evidence of fraud’, provided that such evidence has been notified to the taxpayer, the assessment period could be increased by four years to an aggregate assessment period of seven years.
Alternative dispute resolution
Describe any alternative dispute resolution (ADR) or settlement options available?
The tax conciliation service was created in 2011 and is part of the Finance FPS. Its mission is to examine and clarify the taxpayer’s point of view as well as that of the federal tax authorities.
Any taxpayer (private or business) in dispute with the federal tax authorities can call on the tax conciliation service.
Conciliation can take place at any time when the proceedings are in the administrative phase. As soon as the dispute comes before the courts, the tax conciliation service is no longer able to intervene.
Collecting overdue payments
How may the tax authority collect overdue tax payments following a tax review?
The general administration of tax collection and recovery may take precautionary and/or enforcement measures on the taxpayer’s assets (they can serve garnishee, seize estate, undertake a simplified seizure on the attachable portion of wages) to ensure the recovery of the tax.
In what circumstances may the tax authority impose penalties?
As concerns income taxes, where no declaration of income has been submitted at all, or an incomplete or wrong declaration has been filed, within any of the different procedures for levying income taxes, the taxes due can be raised with an incremental penalty from 10 per cent up to 200 per cent, according to a determined scale.
Besides proportional increases, tax law also provides for flat penalties.
The Income Tax Code leaves the administration the option to sanction ‘each violation of the provisions of the Income Tax Code as well as its executory decrees’ with a fine from €50 up to €1,250.
The essential purpose of the flat penalties is to ensure cooperation of taxpayers and third parties within the tax procedures, under the risk of an additional penalty, in cases where a proportional penalty cannot be asked or would be too low.
Special penalties apply with respect to specific reporting duties.
How are penalties calculated?
With regard to income taxes, the taxes due can be raised with an incremental penalty from 10 per cent up to 200 per cent, according to previously determined scales.
These scales make a difference according to whether the mistake in the tax return was outside the taxpayer’s competence (no tax increase); whether the mistake was in good faith (subsequently 10 per cent, 20 per cent and 30 per cent, and the fourth time it is considered to be intentional); whether the mistake was done intentionally to avoid taxes due (subsequently 50 per cent, 100 per cent and 200 per cent); or whether the taxpayer made use of fraudulent documents (automatically 200 per cent).
The increase will only be applied when the non-declared income reaches at least €2,500, while the administrative penalty combined with the regular taxes due can never exceed the non-declared taxable income.
Besides this legal correction, the tax authorities still can correct the percentages in view of the concrete circumstances (in cases where the taxpayer is cooperative for instance).
Besides proportional increases, tax law also provides for a flat penalty for each violation of the provisions of the Income Tax Code.
As for the proportional penalties, these fines also progressively increase from €50 up to €1,250, according to determined scales depending on the repetition of the facts and the faith of the taxpayer.
Special penalties apply, ranging from €1,250 to 25,000 for non-compliance (late, incomplete, or no filing) with the new transfer pricing documentation requirements.
A penalty of €6,250 is imposed on a taxpayer for not reporting a foreign entity or a trust (€6.250 per year and per undeclared entity or trust).
What defences are available if penalties are imposed?
Taxpayers may ask the Finance FPS for a reduction in the penalties provided that some conditions are met (good faith in particular).
Any director’s administrative decision may also be challenged (and therefore claims on surcharges and penalties in connection herewith) by the taxpayer by lodging a legal action to the court of first instance.
Taxpayers may request cancellation of penalties where the statement of reasons by the tax authorities is not sufficient or if the penalties are disproportionate.
In what circumstances may the tax authority collect interest and how is it calculated?
A late payment interest is charged on any income tax or penalty that remains unpaid after it has become due and payable.
The late payment interest rate is determined annually based on the 10-year linear bond rate (OLO) of the month of July, August and September. The rate varies between 4 per cent and 10 per cent.
Late payment interest for 2018 is 4 per cent.
For tax debts that have already generated late payment interest on 31 December 2017 at least two interest rates will apply. The interest rate of 7 per cent per year (as of 1 September 1996 until 31 December 2017) and the interest rate of 4 per cent (as of 1 January 2018).
Are there criminal consequences that can arise as a result of a tax review? Are these different for different types of taxpayers?
Belgian criminal law is regulated in separate codes, which describe the general criminal law procedure, as well as different offences and provide for sanctions. They can also be applied in a particular tax context. As such, capital benefits coming from tax offences can be confiscated profit from money laundering and handling of stolen goods is also sanctioned in a tax context.
‘Tax fraud’ is the basic criminal offence, sanctioned with imprisonment from eight days up to two years and a fine ranging from €250 to €500,000 or one of both sanctions. Tax fraud means each conscious contravention of the regulations provided for in the Income Tax Code as well as its implementing orders and can consist of acting, as well as failing to act.
An aggravated offence is provided in the Income Tax Code called ‘Serious tax fraud whether organised or not’.
The fines can be subject to the additional surplus charge and criminal fines for tax offences can add up to €3 million.
Both individuals and legal entities can be subject to criminal proceedings.
What is the recent enforcement record of the authorities?
The number of enforcement and precautionary measures taken in 2017 was 582,606 (compared with 617,816 in 2016 and 778.527 in 2015).
In 2017, the rate for the recovery of tax debts was of 70.75 per cent.
A total of 1,876 courts proceedings were initiated in 2017 (compared with 1,783 in 2016).
According to the enforcement survey of 2017, reassessed taxes and associated penalties were estimated by the Special Tax Inspectorate to be €2.125 million (compared with €1.718 million in 2016).
Third parties and other authorities
Cooperation with other authorities
Can a tax authority involve or investigate third parties as part of the authority’s review of a taxpayer’s returns?
In order to assess taxes due by a taxpayer, the tax authorities may request written testaments from third parties; they may also request from a third party any information considered to be essential for the establishment and the collection of the tax due. They may proceed to investigations involving third parties and to hearings of third parties.
Third parties must answer to the questions or penalties may ensue.
Does the tax authority cooperate with other authorities within the country? Does the tax authority cooperate with the tax authorities in other countries?
The Finance FPS exchanges information at the Belgian level and with foreign tax authorities.
Belgium has signed a bilateral ‘FATCA’ agreement with the United States for an automatic exchange of data between both countries.
The OECD and its members, including Belgium, have developed the international Common Reporting Standard (CRS) for the purpose of automatically exchanging fiscal information at the international level (AEOI - automatic exchange of information).
The principles laid down by the OECD have been transposed in the European Union by means of a new directive on administrative cooperation (DAC 2014/107/EU) governing the automatic data exchange between the 28 member states.
Since September 2017, the Belgian tax authorities started automatically sharing information with foreign tax authorities about financial accounts and assets held in Belgium. In parallel, Belgium receives information about accounts and assets held by Belgium residents in other EU member states.
Voluntary disclosure and amnesties
Do any special procedures apply in cases of financial or other hardship, for example when a taxpayer is bankrupt?
The General Administration of Tax Collection and Recovery may grant payment facilities if the taxpayer is in financial hardship. A write-off of all or part of the taxes may under exceptional circumstances be granted.
Individual taxpayers facing financial difficulties may benefit from the indefinite suspension of payment of taxes. Several conditions must be met. No such procedure exists for companies.
In case of bankruptcy, the debtor is exempt from corporate income tax.
Since 1 April 2009, any company can also enter into an amicable settlement with some or all of its creditors (including the tax authorities) to address its difficult financial situation or to reorganise its enterprise. The parties to this amicable settlement are free to determine its content but the amicable settlement does not affect the rights of third parties. The amicable agreement is based on the free will of the debtor to enter into such agreement if and when he or she wants and with creditors he or she chooses.
Are there any voluntary disclosure or amnesty programmes?
A permanent regime of voluntary disclosure for tax and social security allows a regularisation for both federal taxes (income tax, VAT and social security contributions) and regional taxes (inheritance and registration duties).
Both individuals and legal entities can apply for tax regularisation.
The taxpayer will have to pay the tax due (at the legal rate) with a penalty of 24 per cent in 2019 (23 per cent in 2018).
If the taxpayer cannot prove that the capital has already been taxed, a penalty of 39 per cent applies in 2019 (38 per cent in 2018).
Special rates apply for registration duties and inheritance taxes.
The taxpayer will, after completion of the disclosure procedure, receive a certificate stating that he or she has a tax and a criminal immunity.
Rights of taxpayers
Rules protecting taxpayers
What rules are in place to protect taxpayers?
The principle of equality laid down in the Constitution implies that all taxpayers that are in a similar situation must be taxed in a similar way and that taxpayers that are in different situations must be treated differently.
According to the principle of legality, no tax for the benefit of the state may be levied except by way of a statute. This competence may not be transferred to the judiciary or to the executive power.
This implies that tax law must be interpreted in a strict manner; tax law derogates indeed from the fundamental principle that goods and persons are free by nature.
The Constitutional Court is competent to test the potential infringement of the Constitutional principles.
Supranational treaties with direct national effect prevail over Belgian domestic tax law, meaning the domestic tax law must be interpreted in light of such treaties.
The Belgian taxpayer can thus invoke the rights from human rights conventions.
The Belgian taxpayer can also invoke the charter of EU taxation.
Belgium also applies the principle of fair play and of sound administration and the taxpayer has a right to legal certainty and predictability.
How can taxpayers obtain information from the tax authority? What information can taxpayers request?
The taxpayer has a legal right to access its tax file and to be heard by the regional director.
The tax authorities must explain the reasons for the assessment and they must respond to the arguments invoked by the taxpayer. If they do not justify their assessment, the court may declare the assessment null and void.
Tax authority governance
Is the tax authority subject to non-judicial oversight?
Any taxpayer may submit a complaint to the Complaint Coordinator (within the Finance FPS). The complaint must explain the reason why the taxpayer has a grievance against the Finance FPS and which entity is concerned. The Finance FPS will answer within 40 days.
If the taxpayer is not happy with the response, he or she may submit a complaint to the Federal Mediator.
Court actions (describe trial court actions in this section)
Which courts have jurisdiction to hear tax disputes?
Tax disputes are under the exclusive jurisdiction of the tax chamber of the court of first instance. Appeals against first instance judgments can be brought before the Court of Appeal. Appeals against judgments of the Court of Appeal are brought before the Supreme Court.
Lodging a claim
How can tax disputes be brought before the courts?
The taxpayer can start the tax litigation proceedings at the court of first instance to appeal the regional director’s decision in the event that the taxpayer is not satisfied with the decision or if the regional director fails to make a decision on a tax complaint within six months of its filing.
Tax proceedings are initiated by filing a petition within three months of the regional director’s decision.
Combination of claims
Can tax claims affecting multiple tax returns or taxpayers be brought together?
There is lis pendens whenever requests are made on the same subject and for the same cause, between the same parties acting in the same capacity, before several different courts competent to know and be called upon to rule in the first instance of jurisdiction.
Claims may be treated as related where they are so closely linked that it is desirable to hear and determine them at the same time in order to avoid solutions that would be irreconcilable if cases were judged separately.
The taxpayer may also bring tax claims involving multiple assessments and multiple decisions together into a single procedure.
Must the taxpayer pay the amounts in dispute into court before bringing a claim?
The taxes must not be paid as long as the tax assessment is challenged.
The taxpayer is thus not obliged to pay the amounts in dispute into courts before bringing a claim.
The collection of the challenged amount of tax is suspended while proceedings are pending.
To what extent can the costs of a dispute be recovered?
When a party loses its case, apart from the court fees that are automatically to be paid by the losing party, it risks having to settle a compensation for proceedings, granted by the court to the winning party.
The compensation aims at totally or partly covering the fees due by the winner to his or her lawyer.
The compensation is determined in relation to the value of the claim and can be adjusted by the judge at the request of the parties on the basis of the financial capacity of the losing party, the complexity of the case, the amount at stake and the apparently unreasonable character of the situation.
The amount of the compensation is calculated as follows: when the value of the claim is less than €1 million, the standard indemnity ranges from €180 to €24,000.
When the value of the claim exceeds €1 million, the standard compensation is €18,000 and the maximum indemnity is €36,000.
The compensation for proceedings is only due if the successful party has hired a lawyer to assist him or her before the court. In many tax cases, the tax authorities are represented by an official and they do not hire a lawyer and thus cannot benefit from a compensation award.
Are there any restrictions on or rules relating to third-party funding or insurance for the costs of a tax dispute, including bringing a tax claim to court?
There are no restrictions or rules relating to third-party funding or insurance for the costs of a tax dispute.
Court decision maker
Who is the decision maker in the court? Is a jury trial available to hear tax disputes?
Most cases are decided by a single judge. Complex cases are decided by a three-judge panel.
All cases heard by the Supreme Court are decided by a panel consisting of five judges.
There is no jury trial in tax matters.
What are the usual time frames for tax trials?
Each stage of trial (court of first instance, Court of Appeal and Supreme Court) lasts about two years. There are no mandatory time frames and depends on the complexity of the case.
What are the requirements concerning disclosure or a duty to present information for trial?
All documents are admissible and examined by the court for their relevance, credibility and value to the case at hand.
The court can order the parties to submit evidence in their possession.
The court can also request third parties to submit specified documents.
What evidence is permitted in a tax trial?
Tax proceedings are essentially based on written evidence. Witnesses are therefore very rarely heard at a trial.
In some complex cases, experts are asked to testify (eg, in cases of serious and organised tax fraud).
Evidence must be translated in the language of the procedure (French, Dutch or German, depending on the court).
Who can represent taxpayers in a tax trial? Who represents the tax authority?
Taxpayers may represent themselves but it is recommended that they are represented by a lawyer.
Representation by a lawyer is mandatory before the Supreme Court.
Taxpayers who cannot afford legal representation may request legal aid.
The tax authority does not generally hire a lawyer before the court of first instance and is represented by its own agents but it is always represented by a lawyer before the Court of Appeal and before the Supreme Court.
Publicity of proceedings
Are tax trial proceedings public?
Tax trial proceedings are public.
Burden of proof
Who has the burden of proof in a tax trial?
According to the rules relating to the burden of proof, the tax authorities have the onus to prove the facts increasing a taxpayer liability and the taxpayer to prove the facts decreasing his or her liability.
When a tax case is brought before the court of first instance, the taxpayer is always the claimant and the tax authorities are the defendant but the court will not presume the tax authorities’ tax assessment to be correct.
Case management process
Describe the case management process for a tax trial.
The exchange of briefs is organised by the court. Each party addresses its briefs to the court and to the other party.
Briefs are exchanged in two or three rounds (of approximately two months) and pleadings follow approximately two months after the last exchange of briefs.
Can a court decision be appealed? If so, on what basis?
Appeals against first instance judgments in tax matters can be brought before the Court of Appeal. The appeal against the judgment should be brought to the Court of Appeal within one month following service of the judgment. The taxpayer can choose to be heard by a chamber of three judges instead of one.
Appeals against judgments of the Court of Appeal are brought before the Supreme Court within three months following service of the judgment.
The Supreme Court reviews last instance decisions and rules only on points of law.