Constitutional Court rules that articles allowing for additional taxes after ordinary assessment periods violate the Constitution
Article 358 of the Belgian income tax code (ITC 92) provides a special taxation period for the tax administration. More specifically, article 358, §1, 3° and §2, 2° ITC gives the tax administration the possibility to establish an additional tax even after the expiration of the ordinary assessment periods (of in principle 3 years). This is possible when a legal claim shows that the taxable income was not declared in one of the five years preceding the year in which the claim was filed. From the moment the decision on the legal claim is no longer appealable, the tax authorities have a period of 12 months to establish an additional imposition.
The opening of a simple criminal investigation by the public prosecutor undoubtedly constitutes a "legal action" within the meaning of Article 358, §1, 3° CIR. By contrast, a decision to dismiss by the public prosecutor's office does not, in the case law of the supreme court, constitute a "decision" within the meaning of Article 358 §2, 2° ITC (Cass., Feb. 23, 2018, F.17.0078.F).
Specifically, this has the effect that, based on the opening of simple criminal investigations, it may turn out that taxable income was not declared in any of the five years preceding the year in which the claim is filed. Since a decision to dismiss cannot be the starting point of the 12-month period available to the tax authorities to establish an additional assessment, this period de facto never starts and the taxpayer remains indefinitely uncertain about any additional taxation.
In a preliminary question, the Constitutional Court was asked to examine the compatibility of Article 358 with Articles 10, 11 and 172 of the Constitution. Articles 10, 11 and 172 of the Constitution guarantee the principle of equality and non-discrimination. The principle of equality and non-discrimination is violated when it is found that there is no reasonable relationship of proportionality between the means used and the objective pursued. More specifically, the Court was asked to compare taxpayers whose tax situation is being reviewed, on the one hand, on the basis of a legal action that is the subject of a decision against which no further objection or appeal is possible, and, on the other hand, on the basis of a legal action that is the subject of a dismissal by the prosecutor.
In the former case, the 12-month period within which the tax must be determined takes effect; in the latter, it does not.
The categories of taxpayers are similar. Both involve taxpayers whose tax situation is reviewed because a legal claim reveals that taxable income was not declared in any of the 5 previous years. However, there is a difference in treatment based on an objective criterion, namely whether or not the legal claim is the subject of a decision that is no longer subject to objection or appeal.
The special assessment period of Article 358 ITC is a measure to combat tax fraud.
In light of this objective, the Court considers it justified that the 12-month period available to the administration to levy an additional tax does not begin to run until after the final final decision on the legal action. Indeed, it is possible that undeclared taxable income may come to light until the end of the proceedings.
However, the Court ruled that this has disproportionate consequences for the taxpayer whose tax situation is reviewed on the basis of an action that is the subject of a dismissal. The latter remains in limbo indefinitely, since the exceptional taxation period never begins to run for him.
The Court therefore decides that Article 358 §1, 3° and §2, 2° ITC violate Articles 10, 11 and 172 of the Constitution (GwH Nov. 10, 2022, No. 144/2022).
In an interpretation consistent with the Constitution, it should therefore be ruled that in the event of dismissal, the period available to the tax authorities to register the undeclared income begins to run from the date of such dismissal.
Specifically, this has the effect that, based on the opening of simple criminal investigations, it may turn out that taxable income was not declared in any of the five years preceding the year in which the claim is filed. Since a decision to dismiss cannot be the starting point of the 12-month period available to the tax authorities to establish an additional assessment, this period de facto never starts and the taxpayer remains indefinitely uncertain about any additional taxation.
In a preliminary question, the Constitutional Court was asked to examine the compatibility of Article 358 with Articles 10, 11 and 172 of the Constitution. Articles 10, 11 and 172 of the Constitution guarantee the principle of equality and non-discrimination. The principle of equality and non-discrimination is violated when it is found that there is no reasonable relationship of proportionality between the means used and the objective pursued. More specifically, the Court was asked to compare taxpayers whose tax situation is being reviewed, on the one hand, on the basis of a legal action that is the subject of a decision against which no further objection or appeal is possible, and, on the other hand, on the basis of a legal action that is the subject of a dismissal by the prosecutor.
In the former case, the 12-month period within which the tax must be determined takes effect; in the latter, it does not.
The categories of taxpayers are similar. Both involve taxpayers whose tax situation is reviewed because a legal claim reveals that taxable income was not declared in any of the 5 previous years. However, there is a difference in treatment based on an objective criterion, namely whether or not the legal claim is the subject of a decision that is no longer subject to objection or appeal.
The special assessment period of Article 358 ITC is a measure to combat tax fraud.
In light of this objective, the Court considers it justified that the 12-month period available to the administration to levy an additional tax does not begin to run until after the final final decision on the legal action. Indeed, it is possible that undeclared taxable income may come to light until the end of the proceedings.
However, the Court ruled that this has disproportionate consequences for the taxpayer whose tax situation is reviewed on the basis of an action that is the subject of a dismissal. The latter remains in limbo indefinitely, since the exceptional taxation period never begins to run for him.
The Court therefore decides that Article 358 §1, 3° and §2, 2° ITC violate Articles 10, 11 and 172 of the Constitution (GwH Nov. 10, 2022, No. 144/2022).
In an interpretation consistent with the Constitution, it should therefore be ruled that in the event of dismissal, the period available to the tax authorities to register the undeclared income begins to run from the date of such dismissal.
