Companies are obliged to file a corporate tax return on an annual basis [1]. The general rule is that, as from the balance sheet date and irrespective of the date of the general shareholders' meeting , a period of seven months is granted to submit the return[2].
However, in practice, an additional extension is granted every year by the Minister for Finance, whereby companies having their financial year-end on 31 December have a longer period to file their corporate tax return. Based on the so-called ‘Engagement Statement’, as signed by the ITAA (Institute for Tax Advisors and Accountants) and the Minister for Finance, said additional extensions will be limited in the future. For assessment year 2023, which is a transition period, the filing due date has been set on 9 October 2023.
The Engagement Statement also indicates that interim filing dates will continue to exist, meaning that companies submitting their return prior to a particular date will receive their corporate tax refund earlier (if applicable). On the other hand we notice (based on recent case law and law amendments) that a late/incomplete/incorrect corporate tax return is more strictly and severely punished by the tax authorities.
For completeness’ sake please find hereafter the relevant filing due dates for the personal income tax returns of assessment year 2023:
- 30 June 2023 for the personal income tax return on paper
- 15 July 2023 for the personal income tax return using Tax-on-Web
- 18 October 2023 for complex personal income tax returns using Tax-on-Web.
Finally, we would like to stress that individual extensions are only granted in case of very exceptional circumstances or force majeure.
The last years the focus has been set on a timely filed and correct tax return. At the same time individual extensions are no longer granted.
In practice, this led to companies whose financial statements were delayed due to various circumstances were unable to file a correct and timely tax return. In practice, said problem was ‘solved’ by submitting the corporate tax return based on so-called draft financial statements (i.e. financials statements which are not yet approved by the general shareholders’ meeting), whereby the return was filed on time and adverse consequences of a late tax return (ex-officio assessment with reversal of burden of proof and accompanying tax increases and penalties) could be avoided. As soon as the final and approved financial statements were available, the procedural means were used to “adjust” the filed tax return, if applicable.
However, said pragmatic approach no longer guards companies from adverse consequences. The meeting minutes of the general shareholders' meeting constitutes a mandatory annex of the corporate tax return. Moreover the published financial statements (and therefore the financial statements as approved by the general shareholders' meeting) form an integral part of the tax return. The lack of said meeting minutes and/or the fact that the financial statements have not yet been approved thus leads to the qualification as incomplete and/or incorrect. Furthermore the consequences of a late/incomplete/incorrect tax return are equalized. The last legal loophole in this respect was closed at the end of 2022 by textual amendments in the Royal Decree.
What are the consequences of a late/incomplete/incorrect tax return?
The tax authorities can impose a tax increase[3] and an administrative penalty[4] in case of no return, a late return and a incomplete or incorrect return.
In case a tax increase is imposed, the tax due will be increased by a percentage varying between 10% and 200%[5] of the tax due on the undeclared or late income. However if the declared or late income is less than €2,500, the tax authorities cannot apply the tax increase.
Moreover, the result stemming from the amendment of the tax return or an ex-officio assessment (which can be imposed in case a return is late/incorrect/incomplete) for which a tax increase of 10% or more has actually been applied, cannot be offset with any tax deductions, leading to an effective cash-out.
An administrative penalty can range from €50 to €1,250.
The tax authorities also have procedural possibilities, i.e. ex-officio assessment[6], minimum taxation (€41,900 for the assessment year 2023)[7] and application of the extended assessment periods[8]. In the case of an ex-officio assessment the tax authorities will determine the taxable income based on the information at their disposal (for example the late tax return). However, in this case there is a reversal of the burden of proof, meaning that the taxpayer should provide proof of the correct taxable income.
In order to encourage tax payers’ to file their tax returns on time, an extended inspection and assessment period was recently introduced. From assessment year 2023 onwards, a new extended inspection and assessment period of four years (instead of three) will apply if the tax return has been filed late or not filed at all.[9]. For completeness sake, we would like to mention that new inspection and assessment periods have been introduced depending on the complexity of the tax return.
A recent decision by the Constitutional Court confirms that there is no violation of the ‘non bis in idem’ principle (i.e. the principle whereby a single infringement can only be penalised once) if the tax authorities impose a tax increase and an administrative penalty, as the object of the tax increase is to safeguard the Treasury’s rights, whilst the object of the administrative penalty is to stimulate the tax payer to meet his future tax obligations.[10].
As already explained above, there is a wide range of sanctions in the case of a late/incorrect/incomplete tax return. In recent case law[11], the question was raised whether the tax authorities can apply the deduction limitation in the case of an ex officio assessment whereby the taxable base was solely determined based on a late return without an effective tax audit taking place leading to an increase of the taxable base.
For the Antwerp Court the case at hand concerned a company that filed its corporate tax return for assessment year 2019 too late. In response, the tax authorities imposed an ex officio assessment based on the late filed return. Furthermore the tax authorities applied the tax deduction limitation based on Article 207 of the income Tax Code and in addition to this a tax increase was applied. In concrete terms this meant that no tax deductions could be used. The court ruled that Article 207 of the Income Tax Code was clear and did not need further interpretation. However, the court acknowledged that the tax increase could not be imposed, since the former Article 444 of the Income Tax Code did not provide for a tax increase based on late declared income. Consequently the tax deduction limitation of the former Article 207 of the Income Tax Code could not be applied. In the meantime the tax legislation has been updated, whereby a tax increase can now be imposed in the event of a late tax return.
Another court case[12] in Ghent concerned a company that filed its corporate tax return too late. By means of an ex-officio assessment the authorities imposed a tax increase of 10% and disallowed any tax deductions based on Article 207 of the Income Tax Code. In this case the court ruled that the consequences were disproportional (given that the additional tax amounted to approximately €60,000). As a result, the court reduced the tax increase from 10% to 9.9%, whereby the tax deduction limitation was no longer applicable.
The importance of a timely and correctly filed return is increasing. In other words, it is crucial that corporate income tax returns are filed on time based on the approved financial statements. If not, the tax authorities can apply a tax increase, an ex-officio assessment (with reversal of the burden of proof), administrative fines and the deduction limitation.
Moreover, recent case law demonstrates that the legislation no longer requires interpretation (all loopholes have been closed) and that the tax authorities do not hesitate to apply the legislation strictly. It is therefore highly recommended to file a timely and correct tax return in order to avoid discussions with the tax authorities (and lawsuits).
[1] Article 305 of the 1992 Income Tax Code
[2] Article 310 of the 1992 Income Tax Code
[3] Article 444 of the Income Tax Code
[4] Article 445 of the Income Tax Code
[5] Articles 444 and 445 of the Income Tax Code
[6] Article 351 of the Income Tax Code.
[7] Article 342,§3 of the Income Tax Code
[8] Article 354 of the Income Tax Code.
[9] Article 354 of the Income Tax Code
[10] Constitutional Court, 17 November 2022, no. 149/2022, Nihoul.
[11] Antwerp court, 29 June 2022, no. 2021/CO/560, www.fisconetplus.be; Ghent court, 13 September 2022, no. 21/655/A, www.monkey.be.
[12] Ghent court, 13 September 2022, no. 21/655/A, www.monkey.be.
