Belgium’s new Tax Policy: Key tax procedural changes

On Friday 31 January 2025, the five political parties expected to constitute a new Belgian federal government reached an agreement on their policy for the coming five years. This agreement includes a series of proposed procedural reforms intended to combat fraud, ensure legal certainty, improve the relationship with taxpayers and achieve an efficiently operating tax administration.

This alert outlines the main procedural reforms included in the new government agreement. Note that the implementation details are to be awaited and that the text of the government agreement itself has been modified between the announcement of the government agreement and the inauguration of the new government in Parliament a few days later.

The government agreement also includes a series of reforms related to corporate income tax, salary taxation and capital gains tax and tax reforms for investors. The link to these other alerts can be found here Tax alerts | EY - Belgium.
 

Amendments of the tax investigation and assessment periods (statute of limitations)

A first important proposed change is the adjustment of the tax investigation and assessment periods. In essence, the extended investigation and assessment period introduced in 2022 will be mostly reversed. The investigation and assessment period will in principle be three years and thus remain the same as before. A four-year period will apply to complex and semi-complex tax returns. This limitation period will replace the current six-year term and is currently foreseen for non-complex returns which are filed late or in an incomplete manner. In case of fraud, the period will become seven years, instead of ten years currently. It is uncertain whether other specific limitation periods will remain in place, e.g. of ten years for legal constructions (subject to so-called Cayman tax rules) or assessment periods of five years in specific circumstances such as in case of exchange of information from abroad.

Below we have compared the limitation periods applicable to pre-2022 periods (until 2021, tax assessment year 2022), the current limitation periods applicable as from 2022 (tax assessment year 2023) and those proposed in the government agreement. Because these procedural rules cannot be applied retroactively to prior periods, it can be expected that three different set of rules will apply simultaneously until the old limitation periods will have extinguished.

The right to rectify the return

The agreement stipulates that a spontaneous rectification by a taxpayer of his or her filed return in good faith should be possible without incurring penalties. It is our understanding that this should allow taxpayers to rectify their return even after the enrolment of their taxes and without the requirement to file an administrative appeal.
 

No automatic application of a 10% tax increase in case of a first offense and good faith

Furthermore, it is intended to foresee that a 10% tax increase will not apply automatically in case of a first offense in good faith. This proposed change is likely the result of the recent statements of the Constitutional court and the Minister of Finance that the 10% tax increase in the current legislation should not apply in case of a first offense with good faith and should always be waived. The current legislation still requires an explicit waiver of the penalty based on the tax authorities’ appreciation.¹ For more information in this respect we refer to our prior alert No 10% tax increase in case of a first mistake - Practical consequences | EY - Belgium.

We understand from the governmental agreement that this principle would be reversed and that the 10% tax increase would not apply in case of a first offense with good faith. The question will be whether a possibility will still be foreseen for the tax authorities to apply the tax increase nevertheless on the basis of their appreciation of the file.

Note also that a legislative proposal in this regard has already been filed on the 30 January 2025 in which it proposed to foresee that “in the absence of bad faith, the minimum tax increase of 10% will be waived in case of a first offense”.²

For corporate income tax matters, the application of this penalty results in a minimum taxable basis without the possibility to offset such taxable basis against current year operational losses or carried forward tax attributes. For more information in this respect we refer to Tax alert - Corporate income tax measures | EY - Belgium.
 

Reasonable lead time for tax procedures – tax arbitration and reallocation of court files

Another objective is to reduce the lead time of tax procedures to a reasonable level. To this end, options will be explored to reallocate tax procedures to other courts if they cannot be handled within a reasonable timeframe.

Furthermore, the government will convert the tax mediation service into a tax arbitration in order to reduce the number of tax disputes handled in court. Access to tax arbitration will only be allowed once the administrative procedure will have been exhausted. To guarantee the independence and impartiality of the tax arbitration, different individuals will be assigned to manage and judge the tax dispute.
 

Legal framework for unlawfully obtained evidence

The government intends to create a clear legal framework for the use of unlawfully obtained evidence by the tax administration, ensuring that the tax administration complies with tax procedures.
 

Improve access to tax authorities

The agreement states that the government will ensure that for all ongoing tax audits and/or disputes or inquiries involving a taxpayer, there is direct and immediate access to the tax inspector or the department responsible for the tax audit. In particular, for audits in the various tax subdomains (VAT, corporate tax, withholding tax, etc.), a uniform communication system will be implemented, and one contact person will be identified for the different competent centres with disclosure of the file handlers’ phone numbers and email addresses. There will be a possibility to contact file handlers directly and to schedule appointments if necessary.
 

Introduction of an “only-once”-principle

To reduce the administrative burdens of the taxpayer, an "only-once”-principle will be introduced. It expectedly means that a taxpayer is not obliged to resubmit information that has already been provided to the government.
 

Principle of legitimate expectations

Another important proposed change is the intention to embed the principle of legitimate expectations in the law, clarifying that taxpayers who have undergone a tax audit on an element of their tax return and continue that practice, under unchanged legislation, they will not be penalized in the event of a later audit.
 

Other announced reforms

In addition to the aforementioned proposed reforms, the agreement also includes the following intentions:

• The publication of all case law in which the tax administration is involved with a focus on the prompt publication of circular letters and adjustments to administrative commentaries upon the announcement of new legislation.
• The appointment of a commission by the government tasked with rewriting and simplifying the Income Tax Code, while preserving current rights, to make the existing rules simpler and more transparent.
• The introduction of a new taxpayers’ charter. The purpose of this charter is to provide greater legal certainty to taxpayers about their rights when dealing with the tax administration.
• The preparation of an analysis on the appropriateness, following the Dutch example, to provide an exemption for a so-called 'objectively tenable position,' i.e., when a filing position is defensible based on the current state of jurisprudence.
• A review of the current bank investigation procedure with the aim of reducing administrative burdens.
• A review of the current system of penalties applicable when a taxpayer deliberately obstructs a tax inspection. This would be replaced by the application of a minimum taxable profit.
  
  

We will closely follow up on the further updates regarding the government agreement and the implementation of the proposed changes in practice. For further questions or assistance, please do not hesitate to reach out to your trusted EY contact person.

¹ The Courts of Appeal of Antwerp and Ghent confirmed this principle i.e. that a tax increase of 10%  applies to a first offence even in good faith and that the tax authorities have a possibility (no obligation) to waive such penalty  (cf. Court of Appeal Antwerp, February 4, 2025, nr. 2023/AR/1141 and 2023/AR/1142; Court of Appeal Ghent, January 14, 2025, nr. 2023/AR/1013).

² A legislative proposal has already been filed in parliament to embed this principle in the law (cf. proposed law to eliminate the tax increase for first-time offenders, Parl. Docs. 2024-2025, nr. 56-0692/001).