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Belgium: Court Rules Tax Haven Requirements Constitutional

(Feb. 4, 2016) Belgium’s Constitutional Court issued a decision on January 21, 2016, on the question of whether tax havens are unconstitutional. The decision, No. 11/2016, was in response to a request for a preliminary ruling sent by a lower court in Antwerp. The request asked whether the rules prohibiting tax deductibility and imposing reporting requirements payments by Belgian taxpayers to tax havens violate the constitutional principles of non-discrimination and equal treatment. (Frank Mortier, Belgium: Constitutional Court: Reporting Rules on Payments to Tax Havens Deemed Constitutional, TAX NEWS SERVICE (Jan. 25, 2016), International Bureau of Fiscal Documentation online subscription database.)


The case is based on a payment from a Belgian company to a company in the British Virgin Islands; the payment was made through a Lithuanian bank. The British Virgin Islands are considered to be a tax haven, but the Belgian business did not report the payment, as legally required. The tax officials rejected the deduction of the payment as a company expense under Belgian tax law. (Id.; for a list of tax havens, see EU Releases World Tax Havens Blacklist, EU BUSINESS (June 18, 2015).) Under a December 23, 2009, law, from January 1, 2010, Belgian taxpayers have been required to report on their tax returns payments of €100,000 (about US$108,000) or more per year to institutions in jurisdictions identified as tax havens. (New Rules in Belgian Income Tax Law for Tax Haven Payments, TIBERGHIEN.COM (last visited Feb.1, 2016); Code des Impots sur les Revenus [Income Tax Law] (Apr. 10, 1992, as in force Jan. 1, 2013) COMPTA-EXCELLENT.)

The taxpayer company argued that the deduction should be allowed, because the transaction was a real one, involving actual services received, and was thus not in fact an instance of tax evasion. The matter was referred by the lower court to the Constitutional Court, to decide whether or not the tax provisions in question (requiring reporting and not permitting deductions) are in violation of the nondiscrimination requirements. (Mortier, supra.)

Decision by the Court

The Court determined that not reporting payments to entities in tax haven jurisdictions was a sufficient reason for the authorities to disallow a deduction. Its judgment stated that the reporting obligation in respect of payments to tax havens is a requirement whether the transaction was a real one or a sham. The law and the way it was used in the case at hand, the Court ruled, did not violate the equal treatment provisions of the Belgian Constitution. (Arrêt n° 11/2016 du 21 janvier 2016 [Judgment No. 11 of Jan. 21, 2016], Constitutional Court website; La Constitution Belge (as revised through Jan. 6, 2014), Belgian Senate website.)