As mentioned in our headline of 17 December 2013, Belgium was sentenced by the European Court of Justice for breaching EU law. The relevant judgment indicated that EU law is violated where a taxpayer cannot effectively benefit from personal tax benefits linked to his family status (e.g. increase in tax free amount for dependent children) due to the fact that he or she is (partially) exempted from Belgian taxation on income linked to activities performed in another member state of the European Economic Area (EEA). The same conclusion was reached by the Belgian Constitutional Court in more recent case law.
The Belgian tax authorities now published a new practice note presenting their point of view on the impact of this case law and outlining the conditions for claiming application of these court rulings.
Conditions
According to the Belgian tax authorities, the case law can only be invoked by taxpayers who have a joint filing obligation and for whom the partner earning the highest income is (partially) exempt from Belgian income taxes due to the fact that he or she is employed in another EEA member state.
Furthermore, the Belgian tax authorities will only allocate the benefits to the other partner (who is taxable in Belgium but has the lower amount of income) if it can be proven that the other member state did not grant any benefit linked to the personal situation of the taxpayer.
Also, in order to be able to claim an additional tax benefit linked to the personal situation, the taxpayer will need to be able to prove that he or she effectively suffered a disadvantage from being (partially) taxed in the other member state. Before granting compensation for the loss, the authorities will make a comparative tax calculation indicating the amount of taxes due in the case that the taxpayer would have been fully taxable in Belgium and compare this with the actual amount of taxes paid in Belgium and abroad. Only in the case of a positive difference will additional compensation be granted.
Procedure
As the aforementioned case law constitutes a new fact, taxpayers who meet the above conditions can file a claim with the Belgian authorities via an ex-officio tax relief procedure, allowing them to introduce a claim for the income received during the 5 preceding years. Note, however, that they can only do so if it is the first claim made with regard to the assessment notice issued.
Conclusion
Taking into account all conditions as set out above, it is rather doubtful whether taxpayers could actually benefit from this new practice note. A taxpayer must effectively encounter a disadvantage from becoming fully taxable in the other member state, which may be difficult to prove. In most cases, taxation in another EEA member state will be more tax advantageous than being fully taxable in Belgium. A case by case approach is thus needed.
In addition, one should take into account that opening a procedure to claim back part of the income taxes may also lead to having to prove the correct application of the relevant double tax treaty.
