Tax authorities are stepping up actions against late and incomplete tax returns
02 Feb 2024
With the tax return deadline now anchored in law and the tax authorities’ increased focus on filing obligations, companies are urged to evaluate their statutory year-end closing and tax compliance processes. Companies that were unable to file timely tax returns or file incomplete tax returns due to a backlog in finalising annual accounts are now facing severe sanctions.
The Act of 28 December 2023 containing various tax provisions (Belgian Official Gazette, 29 December 2023) has legally anchored the date of 30 September of the assessment year as the deadline for companies and legal entities whose financial year ends between 31 December of the year preceding the assessment year up to and including the last day of February of the assessment year to file their tax returns.
For companies and legal entities whose financial year ends at another point in time, the deadline remains the last day of the seventh month following the closing of the financial year.
In the past, the tax authorities did sometimes postpone the filing date in certain circumstances (e.g. internal tax authority IT issues, COVID-19) and deadline extensions were granted in individual cases for exceptional circumstances.
For reasons of legal certainty, the law now explicitly provides that only in the event of compelling reasons or force majeure, may the Administrator General of the administration responsible for the establishment of income taxes grant an extension of the tax return filing deadline. The notion ‘force majeure’ must be understood in accordance with the Civil Code, i.e. unforeseeable and unavoidable circumstances outside the taxpayer’s control (e.g. hacking or cyber incidents, destruction of documents by fire or theft). The law provides that a Royal Decree will be issued to determine which circumstances constitute ‘compelling reasons’ and to explain the rules on how to file a request for an extension.
There are several possible consequences for failing to file a corporate income tax return in a timely manner. First, the tax authorities have the right to apply the ex-officio assessment procedure and to establish taxes based on the information available (e.g. the turnover reported in VAT returns). Next, penalties can be applied such as an administrative fine (ranging from EUR 50 to EUR 1,250) and a tax increase ranging from 10% to 200% which increases per infraction committed. The application of an effective tax increase can also trigger the disallowance of certain tax deductions resulting in a ‘cash-out’ while the company has carried forward tax assets. Finally, last year’s tax procedure reform prolonged the investigation and assessment period by one year in the event that a tax return is not filed in a timely manner (for more information about the investigation and assessment period, see our previous newsflash: https://www.pwclegal.be/en/news/law-of-20-november-2022-on-various-fiscal-and-financial-provisio.html).
Given the consequences, companies that struggle to have their annual accounts (and corporate legal documents) finalised and approved in time, prefer to submit a ‘provisional’ or ‘incomplete’ tax return by the tax return deadline. Then, at a later date, they spontaneously complete or adjust this return once the annual accounts have been finalised and approved.
In our practice, we nevertheless see that the tax authorities are increasingly focussing not only on belatedly filed tax returns but also on ‘incomplete’ tax returns often leading to disproportionate assessments and sanctions. The recent case law is indeed in favour of taxpayers when it comes to waiving disproportionate penalties (see https://www.pwclegal.be/en/news/waiver-of-tax-increases---news---pwc-legal.html).
Our experts are ready to assist you should you need to seek mitigation for any of these consequences.
But as prevention is always better than the cure, perhaps it’s time to think about improving your statutory reporting process for the next year-end cycle. PwC’s Accounting and Tax Compliance team would be happy to answer any questions on this (for more information see: https://news.pwc.be/statutory-financial-statements-filing-deadline-has-passed-time-for-action).
Véronique De Brabanter - Agata Schroyen - Louis Kemseke
