Payments towards tax havens: wake-up call for non-compliant companies

29 oktober 2019

Case

In a case that was handled by the Court of Appeal of Antwerp, a Belgian company late-filed the annex 275F (so not along the CIT declaration). The company declared a payment of a Russian vendor invoice, on a Lithuanian bank account. The account, however, was held by a company in a tax haven. This ‘indirect payment’ should have been added to the CIT declaration, which was not the case.

The Court of Appeal was merciless and followed the tax administration, stipulating that the payment should be added to the tax base of the company. Even if the payment itself was a correct deductible cost.

The Court argued that the legislation has to be interpreted very strictly given the fact that the measure is drawn up in order to fight international tax fraud.

“Get to know your counterparty” and foresee a correct follow-up system

This case is a good example that payments towards tax havens should be looked after and be treated carefully. Companies should foresee a correct follow-up system of its diverse counterparties (so not only their vendors) in order to declare all tax haven payments once the 100.000 EUR level has been exceeded. ‘Forgetting’ a payment could lead to a serious tax raise, even if the payment itself has been done for an economic reason (for instance buying goods from a seller in a tax haven).

Penalty

As stated above, in case of non-compliance, the payment will be treated as a non-deductible cost. Next to this, a tax raise or administrative fine are also possible.

Annex – Tax Havens

Countries according to art. 179, royal decree in the execution of the corporate income tax law:

  1. Abu Dhabi
  2. Ajman
  3. Anguilla
  4. Bahamas
  5. Bahrain
  6. Bermuda
  7. British Virgin Islands
  8. Cayman Islands
  9. Dubai
  10. Fujairah
  11. Guernsey
  12. Jersey
  13. Isle of Man
  14. Marshall Islands
  15. Micronesia
  16. Monaco
  17. Montenegro
  18. Nauru
  19. Uzbekistan
  20. Palau
  21. Pitcairn Islands
  22. Ras Al Khaimah
  23. Saint-Barthélemy
  24. Sharjah
  25. Somalia
  26. Turkmenistan
  27. Turks and Caicos Islands
  28. Umm Al Qaiwain
  29. Vanuatu
  30. Wallis and Futuna

Non-compliant countries according to the OECD that are not included in the Belgian list:

  1. Trinidad and Tobago,
  2. Guatemala

For an analysis of your situation or further information, do not hesitate to contact your trusted HLB expert.

Wladimir Vanderbauwede

wladimir.vanderbauwede@hlb.be

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