Harmonisation of interest in tax matters: what are the key amendments?
14 Nov 2022
The draft legislation of 25 October 2022 harmonising the interest regime in the VAT Code and Code of Miscellaneous Duties and Taxes with the interest in the Income Tax Code in order to bring them more into line with market rates has been recently approved by the Finance Commission.
A distinction is currently made between late payment interest and moratorium interest, both of which have a compensatory purpose. Late payment interest is due by the taxpayer on unpaid tax debt(s) while moratorium interest is due by the Belgian State when the taxpayer has paid an undue tax amount. In addition to this, the different Codes set different treatments and rates for the two types of interest.
As of 2018, according to the Income Tax Code, moratory interest amounts to 2% per year while interest for late payment amounts to 4% per year. These rates will remain unchanged. The distinction between late payment interest rates and moratorium interest rates is somewhat questionable, but it was validated a few years ago by the Constitutional Court.
For VAT purposes, late payment interest, in principle, currently amounts to 0.8% per calendar month, i.e. a rate of 9.6% per year. In exceptional circumstances, the interest rate may amount to 7% (for instance in the context of judicial proceedings) according to the Income Tax Code as well as according to the Code of Miscellaneous Duties and Taxes.
It should be noted that a formal notice from the taxpayer is required in order for the moratorium interest to start accruing.
The new regime provides that, as of 2023, interest rate for VAT purposes will amount to 8% for late payment interest and 6% for moratorium interest.
Finally, with regard to the Code of Miscellaneous Duties and Taxes, the interest rates will be the same as in the Income Tax Code as of 2023, namely 4% for late payment interest and 2% for moratorium interest. The 7% interest rate will no longer apply.
It should be noted that these new rates will be applicable as of 1 January 2023 but will not be retroactive. In other words, the rates applicable for previous years will not be amended.
PwC Legal will be happy to answer any questions you may have on this topic.
