Reports of important amendments to the Belgian tax procedures appeared in the press, prior to the parliament’s summer recess. This newsflash summarises the main aspects and current status of the proposed measures.
Extension of investigation, assessment and retention periods
The draft law on various tax and financial provisions contains substantial changes to the investigation, assessment and retention periods in direct tax and VAT procedures. This measure was first announced by Minister of Finance Vincent Van Peteghem – as part of the second action plan against tax and social fraud. The preliminary draft proposal was approved by the Council of Ministers on 15 July 2022 and subsequently filed with the State Council for review.
Proposed amendments in the direct tax procedure include the following:
- For tax returns that are filed late or are not filed, the investigation and assessment period will be extended to four years (instead of the ordinary three-year period);
- An extended investigation and assessment period of six years will apply for specific cases, such as:
- transfer pricing investigations for companies that are subject to international reporting obligations, such as the local file 275LF (if one of the following thresholds are exceeded: >€1 billion balance sheet total, >€50 million operational and financial income, or annual average number of employees of >100 FTE) or Country by Country Reporting (for groups with consolidated revenue of > €750 million);
- investigations for companies that made payments to tax havens;
- companies that apply for an exemption, a waiver or a reduction of withholding taxes based on a double tax treaty or an EU directive;
- companies that apply Foreign Tax Credits;
- when information is obtained from foreign authorities (when it concerns a reportable arrangement under DAC6 or information from platform operators (provided that the amount concerned for a taxpayer exceeds €25,000);
- Ten years will now become the standard investigation and assessment period for fraud (instead of seven years).The tax authorities will still have to notify the taxpayer of the intention to apply the extended period in case of suspicion of fraud. However, it is no longer required to state the precise indications of fraud at this stage.
- A period of ten years will also apply for so-called ‘complex tax returns’. The draft proposal deems a tax return to be complex and in scope in the following cases:
- presence of hybrid mismatch arrangements;
- application of Controlled Foreign Country (CFC) rules;
- presence of a legal construction that is reportable.
As a consequence, the retention period for accounting and tax records will also be extended from seven to ten years.
The VAT statutes of limitation are amended as follows:
- the three-year period is extended to four years for late or non-filing of the tax return;
- a ten-year period will equally apply for fraud in relation to VAT matters.
The provisions are planned to enter into force as from assessment year 2023 (direct taxes) or VAT becoming due as of 1 January 2023 and only for the future.
Other measures included in the draft law impacting the tax procedure
- obstruction of a tax investigation can be punishable by a judge with penalty payments (dwangsom/astreinte) at the request of the tax authorities;
- the deadline for filing a tax claim / protest letter (administratief bezwaar/réclamation) will be extended from six months to one year;
- the UBO-register, i.e. the database where all the “Ultimate Beneficial Owners” or “ultimate beneficiaries” of a company or other legal entity are registered, will be subject to cross-referencing and data-mining. The Belgian tax authorities are no longer limited to consulting the database for a specific taxpayer.
- harmonisation of the interest regime in the VAT Code and Code of Miscellaneous Duties and Taxes with the interest regime for direct taxes.
Key takeaways: In the light of these upcoming measures, companies should start reviewing data retention policies. Groups with substantial cross-border transactions and complex tax arrangements will also need to re-consider their documentation efforts from a tax perspective given the extended investigation periods and the related burden of proof on some of those arrangements. It is also recommended to review and update policies for (un)announced visits from the tax administration.
These draft laws are subject to changes during the ongoing legislative process.
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*This update was co-authored with PwC Legal.
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