On 22 March 2017, a circular letter has been published with respect to the extended scope of the reporting obligation of payments to tax havens as included in the Program Act of 1 July 2016.
Belgian tax legislation (article 307 BITC 92) foresees in a reporting obligation for (in)direct payments made to tax havens(in case these payments are minimum EUR 100,000 in the taxable period concerned). If payments to tax havens are not reported, they will be automatically treated as non-tax-deductible.
Scope of “tax havens”
Two lists of “tax havens” should be taken into account for this reporting obligation: the “Belgian list” (article 179 RD/BITC 92) and the jurisdictions considered by the OECD as non-compliant as decided during the OECD’s Global Forum on Transparency and Exchange of Information.
In the past, the “Belgian list” already included (1) the jurisdictions with a nominal corporate income tax rate below 10%. On the basis of the Program Act of 1 July 2016, the scope of the “Belgian list” has been extended to jurisdictions (2) that do not levy corporate income tax on income from domestic or foreign sources or (3) where the effective tax rate on foreign income is lower than 15%. In addition, it is explicitly mentioned that only jurisdictions outside the European Economic Area can fall within the scope of the reporting obligation. The definition of “jurisdiction” is also extended to “subdivisions” of recognised States that have an autonomous authority to levy corporate income tax.
The Circular Letter confirms that the envisaged jurisdictions need to be mentioned in a list published by a Royal Decree. Per 4 April 2017, said list has not yet been updated with the principles set forth in the Program Act of 1 July 2016.
With respect to the “OECD list”, the requirement that a jurisdiction had to be listed during the entire taxable period has been abolished. Following the Program Act of 1 July 2016 the date of payment is the determining factor to be taken into account for the reporting obligation. If the jurisdiction was included on the OECD-list on the date of payment, the payment should be reported (in case all other conditions are met as well).
Scope of “payments”
The scope of what needs to be understood by the recipient of the payment has also been enlarged. On the basis of the Program Act of 1 July 2016 the reporting obligation also applies (next to individuals/companies) for payments made to:
- permanent establishments located in a state with a low or zero tax charge;
- bank accounts managed or held by permanent establishments located in a state with low or zero tax charge;
- bank accounts managed or held through credit institutions (or their permanent establishment) located in one of those states.
Entry into force
Finally, it is clarified in the Circular Letter that the new legislation is applicable on payments made as from 14 July 2016.
The scope of the reporting obligation for payments to tax havens has been substantially enlarged. To avoid adverse tax consequences it is very important to verify precisely whether payments are made to certain tax havens (taking into account the additional countries in scope as well as the presence of permanent establishments and location of bank accounts as well). The “Belgian list” of jurisdictions with no or low taxation will be determined by a Royal Decree (after consultation of the Council of Ministers). As per 4 April 2017, the “Belgian list” (as implemented in the Royal Decree – article 179 RD/BITC92) is not yet adjusted according to the new legislation.