As a leading firm, Loyens & Loeff is the natural choice Audit to Litigation Procedure in Belgium: Tax for a legal and tax partner if you do business in or from the Netherlands, Belgium and Luxembourg, our home markets. You can count on personal advice from any of our 900 advisers based in one of our offices in the Benelux or in key financial centres around the world. Thanks to our full-service practice, specific sector experience and thorough understanding of the market, our advisers comprehend exactly what you need. A first insight A 14-02-EN-TPB Tax Procedure in Belgium: Audit to Litigation A first insight By Christian Chéruy, Attorney-at-law www.loyensloeff.com Tax Procedure in Belgium: Audit to Litigation A first insight By Christian Chéruy Attorney-at-law LOYENS & LOEFF TAX PROCEDURE IN BELGIUM: AUDIT TO LITIGATION - A FIRST INSIGHT 1 © Loyens & Loeff SCRL/CVBA 2014 This publication is made available by Loyens & Loeff SCRL/CVBA for educational purposes only as well as to give general information and a general understanding of the law, not to provide specific legal or tax advice. The receipt of this publication does alone create no attorney client relationship with Loyens & Loeff SCRL/ CVBA. Any content of this publication should not be used as a substitute for competent legal or tax advice from a qualified attorney. Loyens & Loeff SCRL/CVBA and all other entities, partnerships, persons and practices trading under the name “Loyens & Loeff”, cannot be held liable for the consequences of making use of this publication without their further cooperation. This publication contains personal views of the authors and therefore does not reflect the opinion of Loyens & Loeff SCRL/CVBA. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or in an automated database or disclosed in any form or by any means (electronic, mechanical, photocopy, recording or otherwise) without the prior written permission of Loyens & Loeff SCRL/CVBA. 2 LOYENS & LOEFF TAX PROCEDURE IN BELGIUM: AUDIT TO LITIGATION - A FIRST INSIGHT “Not one cent should be raised unless it is in accord with the law” Napoleon Bonaparte “We now have so many regulations that everyone is guilty of some violation” An anonymous taxpayer LOYENS & LOEFF TAX PROCEDURE IN BELGIUM: AUDIT TO LITIGATION - A FIRST INSIGHT 3 Loyens & Loeff’s practice combines trial-tested litigation skills with up-to-date substantive tax experience, enabling us to take on the most challenging cases and achieve outstanding results for our clients. 4 LOYENS & LOEFF TAX PROCEDURE IN BELGIUM: AUDIT TO LITIGATION - A FIRST INSIGHT Author’s note With many thanks to David Mackarness for his dedicated application in editing this report. To avoid overloading the reference footnotes in this overview, we have decided to keep them to a minimum and to refer, in the text, to the key provisions of the relevant legislation. The author is ready to provide any further information that may be requested by the reader. If you would like to know more about the topics covered in this overview or about our services in general, please contact: Christian Chéruy at +32 2 743 43 43 or [email protected]. This overview has been updated till 31 December 2013. LOYENS & LOEFF TAX PROCEDURE IN BELGIUM: AUDIT TO LITIGATION - A FIRST INSIGHT 5 Table of contents Introduction 12 1 Functional organization and normative elements 15 1.1 Federal Public Service of Finance 15 1.2 Belgian courts having jurisdiction to deal with tax cases 16 1.3 Belgian substantive and procedural laws 18 2 Assessment of tax 21 2.1 Terminology: assessment year v. taxable period 21 2.2 The tax return 21 2.2.1 Obligation to file a tax return 21 2.2.2 Specific reporting obligations 23 2.2.2.1 Reporting of foreign bank account(s) 23 2.2.2.2 Reporting of foreign life insurance policies 24 2.2.2.3 Reporting of payments made to tax havens 24 2.2.2.4 Reporting of private wealth structures 26 2.2.3 Time limit for filing the tax return 28 2.3 Consequences of filing a tax return 30 2.3.1 Vis-à-vis the BTA 30 2.3.2 Vis-à-vis the taxpayer himself 31 2.4 Possible scenarios and sanctions 32 2.5 Initial assessment 32 2.6 Ex officio assessment 32 2.6.1 In which cases? 32 2.6.2 Procedure 33 2.6.3 Total shift of burden of proof 34 2.6.4 Extension of investigation and reassessment period 34 2.7 Audit process and notice of deficiency 34 2.7.1 In general 34 2.7.2 Time limits of tax audits 36 2.7.3 Obligations of taxpayers 36 2.7.3.1 Request for documents and information 36 2.7.3.2 Maintaining records 38 2.7.3.3 Computerised accounting systems 39 2.7.3.4 A right of entry 39 2.7.4 Obligation of third parties 40 2.7.4.1 General framework 40 6 LOYENS & LOEFF TAX PROCEDURE IN BELGIUM: AUDIT TO LITIGATION - A FIRST INSIGHT 2.7.4.2 Professional secrecy in third-party investigations 41 2.7.5 Restricted obligations of banks to provide information 44 2.7.6 New Act on the processing of personal data by the BTA 48 2.7.7 International exchange of information 49 2.7.8 Notice of deficiency 50 2.8 Investigation and (re)assessment periods 51 2.8.1 Ordinary 18 months assessment period 51 2.8.2 Special three-year investigation and reassessment period 52 2.8.3 Special seven-year investigation and reassessment period 52 2.8.4 Special reassessment periods of 12 and 24 months 53 2.8.5 Special reassessment period of 3 months after the cancellation of the initial assessment by the Regional Director 54 2.8.6 Supplementary assessment within a period of six months after cancellation of the initial assessment by the Tax court 54 2.8.7 No time limit 54 3 Administrative appeals procedures 55 3.1 Tax complaints 55 3.1.1 Time limit for filing a tax complaint 55 3.1.2 Claimants 56 3.1.3 Handling of the procedure 57 3.1.4 Extension of the tax complaint to other assessments 58 3.1.5 Impact on the collection of taxes 58 3.1.6 Final decision 59 3.1.7 Alternative tax assessment 59 3.2 Automatic relief procedure 59 3.2.1 In which cases? 59 3.2.2 Time limit for filing the request 60 3.2.3 Procedure 60 3.2.4 Impact on the collection of taxes 60 3.2.5 Final decision 60 4 Judicial appeals procedures 62 4.1 Introduction 62 4.2 Appeal to the Court of First Instance 63 4.2.1 Subject matter jurisdiction 64 4.2.2 The filing of a petition 64 4.2.3 Procedure before the Court 65 4.2.3.1 Petition 66 4.2.3.2 Hearings 67 LOYENS & LOEFF TAX PROCEDURE IN BELGIUM: AUDIT TO LITIGATION - A FIRST INSIGHT 7 4.2.3.3 Pleadings 68 4.2.3.4 Judgement 68 4.2.4 Costs 69 4.3 Court of Appeal 70 4.4 Supreme Court of Belgium 71 4.5 Constitutional Court 72 4.6 Use of the official languages in judicial matters 73 5 Alternative dispute resolution mechanisms 75 5.1 Ruling process 75 5.1.1 Competent authority 75 5.1.2 Purpose and scope 75 5.1.3 Content and admissibility requirements 76 5.1.4 Handling of the procedure 77 5.1.5 Pre-filing meeting 77 5.1.6 Time frame 77 5.1.7 Legal effect 78 5.1.8 Term and publication 78 5.2 Tax Mediation Service 79 5.2.1 Purpose and scope 79 5.2.2 Time frame 79 5.2.3 Handling of the procedure 80 5.2.4 Absence of administrative authority 81 5.3 Tax regularisation 82 5.3.1 System of permanent tax regularisation until 14 July 2013 82 5.3.2 Transitional system until 31 December 2013 83 5.3.3 As from 1 January 2014: unregulated voluntary disclosure procedures 85 6 Crossing the borders between fiscal law and criminal law 87 6.1 Tax fraud 87 6.1.1 Criteria 87 6.1.2 Concept at the crossroad of other of legislations 88 6.1.3 Punishments 91 6.1.4 Change of atmosphere 92 6.1.5 Tax planning v. tax fraud 93 6.1.6 Schematic diagram 95 6.2 Criminal prosecution 96 6.2.1 The basic tradition and characteristics of the Belgian criminal justice system 96 6.2.2 Public Prosecution Service 97 8 LOYENS & LOEFF TAX PROCEDURE IN BELGIUM: AUDIT TO LITIGATION - A FIRST INSIGHT 6.2.3 Brief overview of the pre-trial procedures 100 6.2.4 Trial jurisdiction(s) 105 6.2.5 Burden of proof 107 6.2.6 Exclusion of evidence illegally or improperly obtained 107 6.2.7 Right to silence 109 6.2.8 Possibility to enter into a transaction with the Public Prosecutor for tax offences 110 6.2.9 Corporate criminal liability 112 6.2.10 Non-applicability of statutory limitation to tax fraud 114 6.3 Interfaces between the BTA and the Public Prosecution Service 115 6.3.1 Strictly regulated communications 115 6.3.2 Recent introduction of the Una Via rule 116 6.3.2.1 Concept 117 6.3.2.2 Scope of the Una Via rule 117 6.3.2.3 New regulated consultation process 118 6.3.2.4 Simple fraud v.