Context

As you know, commissions, fees, remunerations, pensions, etc. must be reported on individual statements (form 281.XX) and summary statements (forms 325.XX) in due time. In the case of companies, article 219 of the Belgian Income Tax Code provides that the tax authorities may levy a 309% secret commission tax if and to the extent that the company failed to properly and timely comply with this reporting requirement, the fact that the beneficiary would have actually suffered tax on such improperly or lately reported payments being totally irrelevant.

This penalty has already been regarded on several occasions as somewhat oversized in the case where late or improper reporting did not prevent the tax authorities from assessing tax on the litigious payments in the hands of their beneficiaries. It should be noted however that in such event the tax authorities sometimes accepted not to assess the secret commission tax.

News

On 4 July 2002, the Senate adopted a draft bill submitted to the Belgian Chamber of Representatives for approval, that moderates the scope of application of the secret commission tax. According to this draft bill, the secret commission tax would no longer be applicable if the paying entity demonstrates that the litigious payments have been reported in the beneficiary’s tax return filed in compliance with article 305 of the Belgian Income Tax Code.

Subject to the approval of the Belgian Chamber of Representatives, this new tax law provision should become effective as of assessment year 2003. The Minister of Finance also announced that the tax authorities would issue a practice note in this respect.

The Senate documents are available at
http://www.senat.be/www/?MIval=/Dossiers/DossierFiche&LEG=2&NR=468&LANG=fr