Companies subject to Belgian corporate income tax (residents or non-residents) have to declare direct or indirect payments exceeding EUR 100,000 to recipients established in ‘tax havens’. For these purposes, a tax haven is defined as a country:
- with no or low taxation (i.e. the nominal standard tax rate is less than 10%);
- that, for the whole taxable period in which the payment is made, does not substantially or effectively apply the OECD exchange of information standard on the basis of reviews performed by the OECD Global Forum on Tax Transparency and Exchange of Information.
Recently, in Belgium, a circular letter was published providing guidance on the second category:
- On 22 November 2013, the OECD Global Forum published an updated black list with countries deemed to be non-compliant, including Luxembourg, Cyprus and the Seychelles. As of financial years ending 30 November 2013 or later, payments to recipients established in those countries thus have to be reported. If the rating is revised upon the next meeting scheduled in the course of 2015, the reporting obligation will no longer apply to financial years ending at the earliest on that date.
- Countries deemed to be partially compliant, for instance Austria and Turkey, do not fall within the scope of application.
Under Belgian tax law, non-reported payments are automatically non-deductible. As for the compatibility with double tax treaties and EU law, the circular letter provides as follows:
- Pursuant to the non-discrimination clause of the Belgian-Cypriot double tax treaty, the deductibility of payments to recipients established in Cyprus may not be refused merely because they have not been reported. The Belgian treaty with Luxembourg does not include a similar provision on the basis of which deductibility can still be claimed.
- However, on the basis of the free movement of capital and payments proved for by EU law, the deductibility of payments to recipients established in Member States such as Luxembourg may not be rejected solely on account of non-reporting.
This means that non-reporting of payments to Cyprus and Luxembourg does not result automatically in non-deductibility. However the taxpayer still has the extra burden of proof, as set down in tax law, to defend the the deductibility of the expense. Of course, the principle remains that there is a legal obligation to report such payments.