Wage withholding tax exemptions – The Antwerp Court of First Instance confirms the application of the principle of legitimate expectations

The case concerned the (mis)application of the withholding tax exemption for shift work (Article 275/5 of the BITC 92) for the financial year 2017. In short, a withholding tax exemption of 22.8% may be applied if the conditions are met.

More specifically, the discussion boiled down to the interpretation of the words 'who take over from one another in the course of the day’. The Belgian tax authorities considered that the conditions were not met since the claimant worked with shift workers who took over from one another on a weekly basis rather than shift workers who took over from one another in the course of the day. 

The Antwerp Court of First Instance considered that the condition that the teams must take over from one another in the course of the day was clear: the changeover of the teams must take place every day. According to the Court, the refusal to apply the withholding tax exemption for shift work was correct since the condition of Article 275/5, § 2, 1° of the BITC 92 was not met.

However, the claimant argued that the position of the tax authorities was in conflict with the principle of legitimate expectations since the issue had already been the subject of a tax audit regarding financial year 2011. The tax authorities, however, maintained that no in-depth audit had been carried out on this issue and that, in any case, the principle of legitimate expectations cannot be invoked in a contra legem situation.

More specifically, in the context of the audit regarding financial year 2011, an adjustment notice was sent, which was contested by the taxpayer. Consequently, the tax inspector in charge of the case asked for internal advice from their center of expertise. The center of expertise stated that weekly changeovers could also be accepted. Therefore, no formal taxation was issued, which was in line with the advice given by the center of expertise.

The Court judged that taxpayers who act, in a bona fide manner, can rightfully invoke the principle of legitimate expectations. Indeed, in the case at hand, the previous tax audit has created legitimate expectations that the taxpayer’s application of the aforementioned exemption was correct (even if this was not the case).

This judgment should be approved since it is in line with the jurisprudence of both the European Court of Justice (Elmeka Case C-182/04) and the Belgian Court of Cassation (Cass. 2 September 2016, F.14.0206.N and Cass. 21 April 2022, F.20.0150.N). 

It is important to note in the case at hand that the previous tax audit (regarding financial year 2011) was closed without a tax adjustment, and with no formal decision from the tax authorities confirming their approval of the taxpayer’s position. 

Take away

The Court’s decision confirms the recent trend in jurisprudence that the principle of legitimate expectations must be applied, including in contra legem situations, based on the specific facts of the case.