Tax law

(Alva and the tenth penny)

1. Tax law not only includes personal and corporate tax, but also inheritance tax, gift tax, property tax, vacancy tax, VAT, ... .

2. The regionalization of certain taxes does not simplify the tax landscape. From now on, the Regions are competent for inheritance tax (former death duties) and gift tax (former gift rights).

3. The anti-abuse provision (Article 344 of the Income Tax Code) has also been in place for a few years, whereby the tax authorities set up constructions to pay less tax in particular can be challenged. Please note that not every construction is contested; the contractual freedom remains, but is examined on a case-by-case basis. (eg Ghent, 6.11.2018, RABG 2019, page 521; transfer of pharmacy in 2 phases, first by rent and then transfer).

4. Practical course:

Investigations are carried out on the spot and the auditor will request the accounts or supporting documents. Pursuant to article 319 ITC and art. 63 VAT law. the administration can demand free access to private homes or inhabited premises where work is (or is likely to be) carried out. Permission for access can be requested from the police judge. The administration must indicate which data or suspicions give rise to this. After assessing the right to private life (art.8 ECHR and art. 22 CC) and the inviolability of the home (art. 15 GW), the Constitutional Court ruled that the authorization of the Police Judge must be motivated by the interests and the reasons why home visitation is required.

For income taxes, the tax authorities will often start asking questions in the event of a dispute. These must be answered within a month, and this is an important deadline. If the deadline is not met, or certain questions are not answered, this gives the tax authorities the option of making an official tax assessment, based on figures that the tax authorities suspect, which can sometimes be excessively high, and must therefore be disputed. However, due to the ex officio assessment, the burden of proof is reversed and the taxpayer must then prove. This is not simple and puts the taxpayer in an uncomfortable position.

If a normal assessment follows, after a timely response, and the assessment seems excessive to you, you have nothing to lose to lodge an objection against this assessment. The procedure is noted on your assessment notice. The taxpayer does not have to prove, but it is recommended that you do this. If the auditor finds that your reasoning is not arbitrary, he may then contact you with a view to an amicable settlement.

When the notice of objection has failed, then comes the procedural stage before the court. These cases are then dealt with by the tax chamber of the District Court of each province. Legal principles naturally play a greater role here, as do rules of procedure.

Both possibilities are subject to strict deadlines. For example, with regard to personal income tax, you have six months after receipt of your assessment notice to submit a notice of objection to the tax authorities themselves. After the decision of the tax authorities, you have another three months to file a petition with the competent court.

5. As a lawyer one can intervene at any stage. In the first phase, perhaps through advice or by drawing up advice. Better completely in the judicial phase.

In the meantime, payment of the tax is requested, although it may be requested to pay only the undisputed part. Please note, if one is not right, large interest must be paid.

I.A common discussion point concerns the question of whether certain expenses are deductible or not (even more acute when working with a company).

II. Also discussions about "benefits in kind". Courts can do pioneering work there. They are usually the same chambers for each jurisdiction and their views are very useful to know. (e.g. recent ruling by Antwerp 28.5.2019[1] which agrees that benefits of any kind must correspond as much as possible to their actual value, given that a series of fixed rates are provided for by Royal Decree); or Constitutional Court 26.9.2019, NLW 2020, no.418, page 213 that the art. 219 ITC declares unconstitutional regarding the term (tax on the company as secret commissions no longer when the tax authorities have identified or could have identified the privileged one within the assessment period of 3 years).

III. or an additional assessment based on "signs and indications"; this is usually done according to expenditure incurred; the tax authorities ask for accountability; sometimes this goes very far, for some courts the taxpayer must prove the existence of savings but not prove "that these funds actually served" (Court Ghent 9.9.2003, TF 2004, no 266, 737; Antwerp 17.5.2016, Taxologist 2016, No. 1480, 12); or income taxes on monies that have been misappropriated (but where the amounts repaid are tax deductible)[2]

IV. Or the so-called "attraction principle"; nowadays the tax administration tries eg. to tax the surrender value of an internal pension awarded to a beneficiary who still exercises the function of director as remuneration (despite the terms of articles 20.5 ° and 32 bis Income Tax Code '64 and judgment Court of Appeal Ghent 22.11.2000 (quoted in note Ch Hendrickx, TFR 579, April 2020, p. 24).

6. In case of suspicions of fraud, the tax authorities will often request an extension of the period (limitation period of 3 years) by 4 years, but must then indicate which concrete indications of fraud are available.

7. The office can also provide advice on certain structures (for example, regarding family succession), which may or may not be done in the case of checks, ex officio assessments, regularisations, ... .

Sometimes an advice cannot be unambiguous, the case law can be divided. In tax cases, “rulings” can then be requested. A problem is submitted to the tax authorities in advance, so that certainty is obtained about the result. This is increasingly being done. Prevention is better than cure.

Initially, attempts will always be made to estimate the risks optimally. Should a dispute still arise with the tax authorities, an attempt will first be made to reach an agreement. This is the fastest way to obtain a solution.

[1] Taxologist, 7.8.2019, 1619, p. 1; also RABG 2019-18, page 1589, note Pieterjan Smeyers, recalling that this rule (Article 18 KB / ITC) may not be used to establish the existence of a benefit in kind (rather than just its valuation). would be contrary to the legality principles (art.170 §1 and 172, paragraph 2 of the CC); "After all, the legislator has given the King the power" in the cases it determines "to lay down rules" to estimate those benefits at a fixed amount "(art. 36, §2 ITC 92)

[2] Court of Cassation 22.2.2019, RABG,2019/18,pg 1632