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Does the tax office know what is on your bank accounts ?

Does the tax office know what is on your bank accounts ?

Although we have no formal banking secrecy, every bank in Belgium has a duty of confidentiality to its clients.

To a certain extent, it is generally accepted that this duty is not applicable in dealings with the tax authorities. Tax inspectors do not automatically know what is on your bank accounts, but since 2011 they may request a bank to disclose certain information to determine your taxable income. This is only possible if the authorities suspect tax fraud or if the client’s taxable income is to be determined based on indications of higher than reported wealth.

The Central Point of Contact (CPC) was established within the National Bank of Belgium (NBB) to enable the tax authorities to easily verify with which bank a taxpayer has one or more accounts. Every Belgian banking, exchange, credit or savings institution must annually report their clients’ identity, number of accounts and contracts (e.g. loan agreements, insurance policies, etc.) to the CPC.

From 2021 onwards, Belgian banks, brokerage firms, insurance companies and similar financial institutions are now also required to communicate the balance of their clients’ bank accounts to the CPC every year.

Since a few years, Belgian tax residents have the obligation to report their foreign bank accounts not only in their tax return, but also to the CPC. The tax authorities are in principle already aware of how much money is on your foreign accounts due to the Automatic Exchange of Information (AEOI) between tax authorities as part of the Common Reporting Standard (CRS).

Since 1 January 2021, the CPC will therefore not only receive information on the number of Belgian bank accounts and financial contracts, but also on the balance of your Belgian accounts. The tax authorities right to access this information, however, does not change. They may only consult this information if they have suspicions of tax fraud, if there are indications of higher than reported wealth or in view of recovering a tax claim after receiving a request from a foreign tax authority.

Although the Belgian Data Protection Authority (DPA) made some remarks in respect to the protection of the taxpayers’ privacy, the DPA’s advice is in general not binding and the new measures already entered into force on 31 December 2020.  There is a general concern that this could create the basis for a true ‘asset register’ of all Belgian tax residents.