Every Belgian taxpayer is required to file a tax return each year. This report is then used by the authorities to determine whether there is an additional amount due or you are entitled to a tax refund. The latter is confirmed by the Belgian authorities in an official tax assessment sent directly to the taxpayer afterwards. In view of this, the authorities have the right to double-check whether the information you reported is accurate and complete.
This is where the audit and assessment periods become relevant. If you are selected for tax audit, you obviously want to know your rights and the specific deadlines within which the authorities can investigate you. In this context the Belgian Government introduced a draft bill earlier this month containing various important changes, which will normally come into effect on 1 January 2023.
- Audit & assessment period
If the taxpayer currently files their tax return too late, incorrectly, or not at all, the tax authorities have 3 years’ time to audit and tax you. This period can be extended to 7 years in case of tax fraud. The period starts as from 1 January of the tax year for which taxes are due.
In the proposed new law, the 3-year period is only retained for situations where the authorities want to amend a timely filed return. In case no return was filed, or this was done too late, a new 4-year period will be introduced. For more complex matters, the draft bill provides a 6-year and a 10-year audit and assessment period. The former will apply when the tax return includes certain international elements and qualifies as ‘semi-complex’. The audit period for really complex filings including legal constructions, hybrid mismatches or CFC regulation, will be extended to 10 years. The same 10-year period will apply to cases of tax fraud, which is currently only 7 years.
Parallel investigation periods are provided for each of the new assessment periods. This seems logical. There is no point in being able to perform a tax audit, if the authorities cannot tax you afterwards based on their findings. According to the Belgian legislator, these periods are more in line with the increasingly complex tasks entrusted to the tax authorities. They will be used both for income tax and VAT purposes.
- Retention period
Now taxpayers are required to keep their records for 7 years, which will be extended to 10 years as well. This is to ensure that taxpayers still have all relevant documents available when they are confronted with a 10-year audit or assessment period. It should be noted that the 10-year period applies to all taxpayers and not just in case of tax fraud or a complex tax return.
- Administrative appeal
Taxpayers have the right to challenge the assessment and ask for your tax bill to be corrected. This administrative appeal currently needs to be submitted within 6 months (plus 3 working days) of the date the assessment was sent to you. If you miss the deadline, you will lose the right to appeal, and the tax assessment will be final.
As 6 months is a relatively short period, especially if you live abroad and depend on both local and Belgian postal services to deliver your mail, the draft bill extends the appeal period now to 1 year. This will apply to all tax assessments relating to income year 2022 (tax year 2023) and onwards.
It remains to be seen how the 10-year term will affect the taxpayer’s burden of proof. After all, demonstrating facts that took place 10 years ago will not be an easy task, even if the taxpayer now has twice as long to object.
- Penalty payment
The tax authorities will soon also be able to impose a penalty payment in case the taxpayer or a third party does not cooperate with a tax investigation. This would cover any type of obstruction in the broadest sense of the word. It would include, for example, non-compliance with an on-site tax audit or request to show the books, refusal to allow entry to business premises and so on.
Important to know is that the tax administration will need to get court approval before the penalty payment can be imposed. This ensures judicial oversight.
- When in effect?
The new audit, assessment, appeal and retention periods will enter into force as of tax year 2023 (income year 2022). The draft bill clarifies that the provisions regarding the objection period will apply as of 1 January 2023. To guarantee legal certainty for taxpayers, all tax years preceding tax year 2023 will remain subject to the current legislation.