Belgian tax law foresees a reporting obligation for (in)direct payments made to tax havens (in case the total amount of these payments is minimum EUR 100,000 in the taxable period concerned). In this context, we also refer to our newsflash published on 1 July 2021.
On 20 December 2021, a circular letter has been published which provides administrative guidelines for the reporting obligation of payments to tax havens. The circular letter focuses on three main aspects:
- The importance to apply the reporting formalities diligently;
- The consequences in case the reporting formalities are not carried out in a complete manner;
- The burden of proof in the hands of the taxpayer.
The circular letter stresses the strict application of the formalities. The reporting must amongst others be made on a form 275F itself, a document which is an integral part of the Belgian (non-resident) corporate income tax return. The Belgian tax administration also insists that next to the amount, date and nature of the payment, details about the recipient of the payment are reported. The information given must be complete and precise enough to identify the recipient in question (e.g. the address of the recipient in the State in question must be complete).
Besides the risk of penalties being applied, unreported payments or payments with an incomplete reporting are in principle automatically disallowed for tax purposes.
Belgian tax law places the burden of proof on the taxpayer to substantiate the tax deductible character of payments. Even if the reporting has been done correctly, the taxpayer will still have to demonstrate that the payments to tax havens have been made in the framework of real and sincere transactions and with persons other than artificial constructions. The circular letter of December 2021 aims to provide guidelines regarding which elements may be relevant in assessing those criteria.
These administrative guidelines are an additional attention point when faced with payments to certain states.
We therefore strongly advise you to test your company’s payments to tax havens against the conditions outlined in this circular letter and to assess the required action(s).
Finally, it may be important to note that at the occasion of a parliamentary question of 30 June 2021, the Minister of Finance stated that “partially compliant” countries are in scope of the reporting obligation for tax returns as from assessment year 2021. This new circular letter however mentions that the reporting obligation on a form 275F includes “partially compliant” States as from assessment year 2022 (and not assessment year 2021).
