Voluntary Disclosure Regime in a Federal State

In 2015 Belgium’s federal government decided to give taxpayers (another) last chance to regularize unpaid taxes and social security contributions. The law introducing a new, permanent voluntary disclosure regime for tax and social security matters, dated July 21, 2016, entered into force on August 1, 2016.

Or at least it did in theory. The challenge: In a federal state where regional governments can levy taxes, the regional governments themselves must also authorize voluntary disclosures for those taxes for which they are competent.

Making the situation even more complex, one item of disclosed capital can involve both regional taxes and federal taxes. For example, a daughter’s inheritance of her father’s undeclared income may need to be regularized for both inheritance tax (regional) and income tax (federal) purposes. Furthermore, suppose the daughter, who lives in a different region than her late father, keeps the money hidden and fails to pay tax on the income by the time she dies and it passes to her own child. If the capital is inherited twice, the regional inheritance tax needs to be regularized in two regions because inheritance tax is due in the region where the deceased was living.

Thus, for the voluntary disclosure regime to be effective, the regional authorities need their own form of tax regularization. Further, for undeclared capital for which two authorities are competent, some form of cooperation between the tax administrations is required to determine who does what and how the proceeds of the tax regularization will be split.

This is not Belgium’s first attempt at creating a voluntary disclosure program. While some issues remain, a year after the latest regime’s enactment, the cooperation agreements, the regional regulations, and the forms are now in place so that taxpayers (at least in many situations) can obtain a full tax amnesty.

To read the full contribution check Tax Notes International or contact the author.

Author: Marc Quaghebeur

Marc Quaghebeur is a Belgian tax lawyer with Cabinet DAVID specialising in international tax issues and cross border estate planning. He is a member of the Brussels Bar and the Society of Trust and Estate Practitioners. He

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