Key takeaways

• The Belgian Ministerial Board for the fight against social and tax fraud is working on a second Action Plan which includes more than twenty action items combatting social and tax fraud, with a particular focus on cross-border transactions and structures.
• One of the main action items consists of an extension of the standard income tax assessment and investigation period in case of late filing of a return from three to four years and a significant extension of that period to 10 years in case of a "complex" tax return. The notion "complex" tax return is still to be defined, but it would include matters related to transfer pricing, international structures and financial flows and more, generally any tax topic where information is needed from abroad. 
• The Action Plan also announces an audit wave into the cross-border arrangements that were reported under the DAC 6 regime as of September 2022.
• Another action item consists of enabling the Belgian courts to impose periodic penalty payments ("dwangsom"/"astreinte") if a taxpayer unlawfully refuses the Belgian tax authorities access to its data and/or its premises. In the context of dawn raids, some taxpayers have refused the tax authorities access to their data servers, for example, and this could provide the tax authorities with an additional measure to exert pressure on taxpayers in this context.
• Some of the action items will need to be translated into proper legislation, but the Action Plan confirms the expectation that the main focus of the tax authorities will be on transfer pricing and more, generally on international tax in the coming years.

In depth

Following the intent of the Belgian Government to continue the fight against fraud, the Belgian Ministerial Board for the fight against social and tax fraud is working on a second Action Plan. The Action Plan includes more than twenty action items, some of which are in particular important for our clients. 

Firstly, the Action Plan considers the tax assessment periods applicable in the countries neighboring Belgium and states that an extension of the standard tax assessment and investigation period from three to four years should be introduced in cases of late filing of an income tax return. A further (considerable) extension of such period to 10 years is put forward in cases involving a "complex" tax return. The notion "complex" tax return is still to be defined, but according to the Action Plan, this would include, among others, transfer pricing, non-declared income, international structures and financial flows and more generally, tax returns requiring information from abroad. This seems to suggest a very broad scope and could entail that almost all income tax returns filed by multinationals are by definition "complex" tax returns subject to a tax assessment and investigation period of 10 years.

As is generally the case for new procedural rules (and as was also the case for the entry into force of the extended assessment and investigation period applicable in the context of legal constructions), we expect that the new extended assessment and investigation periods will be applicable immediately and hence also to assessment periods that have not lapsed yet. If the measure is adopted and published in the Belgian State Gazette in 2022, this would hence entail that the tax returns filed for financial years ended on 31 December 2019 or later and potentially also for those financial years which ended not more than three years ago will already be subject to said new extended assessment and investigation period. To note is that the deadline for filing a tax complaint against a tax assessment would also be extended from six months to one year.

In addition, the Action Plan provides that, to ensure the effectiveness of tax investigations, the Belgian Courts will be able to impose periodic penalty payments ("dwangsom"/"astreinte") if they consider that, within the framework of an investigation by the Belgian tax authorities, taxpayers unlawfully refuse access to, for example, digital data and/or to its premises. This will allow the tax authorities to request the Courts to impose such periodic penalty payments in case they are confronted with a taxpayer who refuses to cooperate and provide access to its premises and/or data or documentation. In the context of dawn raids, some taxpayers have refused the tax authorities access to their data servers, for example, and this could provide the tax authorities with an additional measure to exert pressure on taxpayers in this context. We expect that this measure will be a new impetus for tax dawn raids, particularly by the Special Tax Investigation Office.

The Action Plan also announces an audit wave into the cross-border arrangements that were reported under the DAC 6 regime as of September 2022. These reports are currently manually reviewed (at least the descriptions of the reportable arrangements in the reports) and will be uploaded to a data warehouse in a second stage to allow the tax authorities to apply a data mining risk analysis to perform targeted audits into the reported arrangements.

It is clear that with this Action Plan, the Board for the fight against social and fiscal fraud and the Belgian Government seek to considerably expand the current investigation powers of the Belgian tax authorities without necessarily limiting such expansion to cases of tax fraud, so those good-faith taxpayers will also be impacted by these measures.

Please reach out to your regular Baker McKenzie contact if you would like to discuss further the implications of these developments and the other action items mentioned in the Action Plan.