A. The ordinary three-year period
The Belgian Tax Administration has 3 years from January 1 of the relevant assessment year to establish the tax liability of the taxpayer where it becomes apparent that the tax due is greater than the tax on the moment of income declared.
B. Two-year extension of the three-year period in case of tax fraud
The limitation period of three years is extended an additional two years in the case where the Tax Administration is able to show that the taxpayer has committed a tax law violation with fraudulent intent or with intent to cause damage. The burden of proof lies with the Belgian Tax Administration.
For the two-year extension to be applicable, there are two conditions to be met:
(1) there must be a violation of the tax laws; and,
(2) the taxpayer must have committed the violation with fraudulent intent or intent to cause damage to the interests of another party.
The administrative regulations define "fraudulent intent" as the intent to obtain an illegal benefit (to the detriment of the Belgian treasury). The regulations note that the required intent is not present in cases of simple negligence, administrative error, mistakes made in good faith, etc.
According to case law, the term "fraudulent intent" is a criminal law concept which entails a clearly demonstrated wrongful intent having as its obvious purpose the evasion of an accurate tax assessment.
In the various cases where fraudulent intent has been found to exist, Belgian courts have appeared to rely on the presence of several factors:
(1) the nature of the taxpayer's intent as indicated by documents showing unreported income;
(2) a pattern over several years of consistent under-reporting;
(3) the significance of the amount of unreported income; and
(4) a clear lack of completeness in the information reported on the taxpayer's returns.
C. Extraordinary statute of limitation periods
Under the following circumstances, the Tax Administration is authorized to issue an assessment even after the expiration of the three- or five-year statute of limitation period mentioned above.
1. Withholding tax infringements
If, during the tax audit of a taxpayer, it has been determined that this taxpayer has violated the legal provisions with respect to movable withholding tax or professional withholding tax during one of the five years preceding the year in which the violation has been established by the Tax Administration, the latter may issue an assessment within 12 months following the date on which the violation was established.
2. Tax audits by foreign tax authorities
In case a control or audit, carried out by a competent foreign authority with which Belgium has concluded an agreement for the avoidance of double taxation, has established that taxable income has not been reported in one of the five years preceding the year in which the results of that audit have been communicated to the Belgian Tax Administration, the latter is authorized to issue an assessment within 12 months following the date on which it has received the information from the foreign authorities.
3. Non-reported income revealed by a legal action
If a legal action ("action judiciaire/rechtsvordering") reveals that taxable income was not reported within a five-year period preceding the year during which the legal action is introduced, the Tax Administration may issue a tax assessment on the income so revealed within twelve months after a final decision is rendered with respect to the legal action.
The legal action should reveal non-reported taxable income. The legal action need not, however, constitute full evidence of such income on its own. The Administration may combine information revealed through the legal action with other information already in its possession.
4. New data of evidential value
The Tax Administration is allowed to issue a new tax assessment if data of evidential value ("'l'ments probants/bewijskrachtige gegevens") reveals that income was not reported during the five-year period preceding the year during which the Tax Administration becomes aware of such data. In this case the supplementary tax must be assessed within twelve months as of the date upon which such data becomes known to the Tax Administration.
In its administrative commentary, the Tax Administration cites as examples of evidencing data : "an audit, an investigation, an appraisal, an arbitration, a settlement by agreement, etc., to which the taxpayer did agree".
The content of this article is intended to provide general information on the subject matter. It is therefore not a substitute for specialist advice.
De Bandt, van Hecke & Lagae - Brussels. (32-2) 501.91.80
ARTICLE
28 December 1995