The Act of 27 December 2005 introduced a system of permanent tax regularisation, allowing taxpayers to regularise previously undeclared amounts. The system applies to income, registration and inheritance taxes as well as VAT.
By filing a special regularisation return with a specific department of the Ruling Commission and paying the taxes due plus (in certain cases) a penalty, the taxpayer will in most cases not incur criminal liability and cannot be prosecuted. These rules will most likely continue in effect until 14 July 2013. Thereafter, a transitional system will be introduced (until 31 December 2013). While the transitional system is likely to enter into force on 15 July 2013, the exact date remains to be confirmed in the final legislation. The new, more stringent rules will enter into effect on 1 January 2014.
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The current system extended until 14 July 2013
For undeclared professional income, no penalties apply. However, other types of income (such as dividends or interest income) are subject to an additional 10% penalty. The current system does not distinguish between income for which the statute of limitations has already expired and that for which it is still running. However, it does distinguish between "normal" and "serious and organised" tax fraud. Tax regularisation is only possible in the former case.
The tax regularisation campaign has been a huge success. However, the on-going economic crisis has depleted public coffers and the Belgian government is actively seeking additional revenue, including through new regularisation rules. On 6 June, the federal government announced plans to extend the current system until 14 July 2013, even though it was supposed to be abolished on 30 June 2013. The reason for the extension is that foreign banks where undeclared funds are held must issue a certificate in order for taxpayers to be able to complete the regularisation procedure, and they are unable to comply with this formality by 30 June 2013.
New (transitional) system until 31 December 2013: more expensive but extended to serious and organised tax fraud
As this is a highly sensitive, politicised matter, no official text is available yet. In addition, the Council of State, Belgium's highest administrative court which advises on draft legislation, has heavily criticised the reformed system as violating several constitutional principles. However, the government recently announced that it will not take into account the Council of State's remarks.
Under the transitional rules, undeclared income and/or capital can most likely be regularised by paying the normal tax due and one of the two following penalties (i or ii) or a percentage of the underlying capital (iii): (i) a 15% penalty for normal tax fraud; (ii) a 20% penalty for serious and organised tax fraud; or (iii) if the statute of limitations for declaring the income has already expired, a penalty equivalent to 35% of the embezzled amount.
As a result, unlike under previous tax amnesty measures, it will be possible to regularise capital originating from certain money laundering offenses. The regularisation requirements will depend on whether the statute of limitations has already expired. However, it should be noted that it will not be possible to regularise amounts resulting from certain illegal activities, such as human and arms trafficking and the like.
An important feature of the transitional system is immunity from criminal prosecution for most cases of tax fraud. This intermediate regime is expected to raise over EUR 500 million.
As from 1 January 2014: tax regularisation no longer possible
Under the final system, the Ruling Commission will no longer be authorised to engage in tax regularisation. The only possibility available to taxpayers will be to enter into an agreement with the tax collector and the public prosecutor's office.
Tax increases and penalties or criminal fines will be computed on top of the tax due. Moreover, no agreement will be possible in the case of both normal and organised and serious tax fraud. Further, by definition, taxpayers will not be immune from criminal prosecution, unless the public prosecutor's office agrees to grant immunity.