The Large Enterprises Division of the Belgian tax administration (“LE Division”) announced the launch of a two-year pilot project on cooperative tax compliance (Cooperative Tax Compliance Program – “CTCP”). The program is aimed at transforming the traditional approach of ex-post tax investigations towards a system of proactive, real-time and constructive dialogue on the tax affairs of corporates.
Belgium joins the list of countries taking steps to adopt a more taxpayer-friendly approach inspired by tax governance and transparency. Reducing tax uncertainty, enhancing compliance and fostering mutual understanding glimmer through as main themes for the initiative.
The CTCP will cover corporate income taxes, VAT, taxes equated to income taxes and miscellaneous taxes falling under the LE Division’s authority. Recovery and collection of taxes would however be excluded.
To date, the LE Division has not yet published details on the CTCP. The information below mentioned may therefore be subject to change.
Criteria to participate
The pilot program will be open for very large enterprises. Participation is on a voluntary basis. The following thresholds will presumably apply:
- revenue EUR 750 million or more;
- balance sheet total EUR 1.5 billion or more;
- staff of more than 1,000;
- subject to corporate income tax in Belgium.
It is yet unclear whether the thresholds are cumulative or whether passing only one of the criteria gives access to the CTCP (when the other conditions are fulfilled). A mandatory all-in or all-out principle will apply to the Belgian entities and branches of groups based on the consolidation rules.
In order to get access to the CTCP, taxpayers also:
- must have filed timely tax returns in the past;
- may not have been engaged in tax evasion;
- may not have violated tax law or demonstrated major shortcomings during the last three years;
- must have paid all taxes due;
- must have a robust Tax Control Framework (“TCF”) in place.
Formalized under an agreement with LE Division
Participation in the program will be formalized through an agreement between the enterprise(s) and the LE Division. For the time being, it is not the intention to take a legislative initiative to implement CTCP.
As part of the program, participants will get a single point of contact (coordinator) within the LE Division. The coordinator will refer and coordinate technical matters (in real time) to the specialists of the LE Division where needed (e.g., transfer pricing, withholding tax, VAT, …). The coordinator and / or specialist will deal constructively with the matters taking into consideration corporate and business insights and will invest in developing industry specific or company specific knowledge.
Impact for taxpayers
Participation in the CTCP does not imply that taxpayers will get a more beneficial tax treatment. All rights and obligations based on national and international legislation remain fully applicable. Although the intention of CTCP is to reduce disputes through real-time and constructive dialogue, enterprises and the LE Division can agree to disagree under the CTCP. In this context, in-depth tax audits remain possible.
Compliant enterprises participating in the CTCP can however expect to receive a lower risk profile with a corresponding impact on the degree of audits. From a procedural point of view it is yet unclear how the proactive and extensive information sharing by the enterprise impacts or interplays with international (automatic) exchange of information mechanisms.
One of the main advantages put forward for the CTCP is the more prompt feedback on tax positions. As it currently stands, it is uncertain if the CTCP dialogue will grant the same level of legal certainty on tax positions as a formal Advance Decisions (rulings) or Advance Pricing Agreements (APAs).
Entry into force
The pilot will kick-off at the end of 2018. Successful preliminary discussions with qualifying taxpayers will lead to a more formal intake process if both enterprise and LE Division consider that the TCTP will come to fruition. The most important part of the intake process will relate to the review of the TCF as well as the basic concepts of the CTCP. The period for the intake process is anticipated to vary from 6 months to 1 year.
The LE Division is in the process of contacting potential candidate taxpayers to test appetite for joining the CTCP pilot. Interested taxpayers meeting the profile and criteria for CTCP can also consider applying spontaneously for the pilot program.
For more details or a discussion on how this may affect your business, please contact Bram Markey or your regular PwC contact.