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Payments to Luxembourg and Cyprus must be reported
Since 1 January 2010 Belgian companies and permanent establishments of foreign companies must report in their annual tax return all (direct and indirect) payments they have made to tax havens (art. 307 ITC 1992) for a total of €100,000 or more. If they are not reported, these payments are not tax deductible. When reported, such payment is only tax deductible if the taxpayer can justify that the payment was made in the context of an actual and genuine transaction with persons other than artificial tax avoidance schemes.

The law defines as tax havens:

- any State that, during the whole tax year when the relevant payment(s) were made, are considered by the OECD Global Forum on Transparency and Exchange of Information as not having effectively or substantially implemented the OECD exchange of information standard; or

- any State that have no or a low tax, the threshold being set at a nominal corporate tax rate of 10% (art. 179 RD/ITC 1992). 

For the second category of States, a first list was adopted in a Royal Decree of 6 May 2010.  The government is in the process of updating that list.

As for the first category, the OECD Global Forum published its report on progress in November last year following a review by peer jurisdictions. Their conclusion was that 26 jurisdictions were rated largely compliant with the Global Forum's information exchange standard, two were rated partially compliant (Austria and Turkey), while four jurisdictions were rated non-compliant (the British Virgin Islands, Cyprus, Luxembourg and the Seychelles).

In Parliament, Finance Minister Geens was questioned about the consequences. He stated that payments made to the British Virgin Islands, Cyprus, Luxembourg and the Seychelles must be reported if they were made in any financial year starting on 1 December 2013. That does not make any difference for the British Virgin Islands since they are already on the list of low tax jurisdictions.

However, for payments to Cyprus, Luxembourg or the Seychelles, this means that they will have to be reported in a form 275F which must be attached to the company income tax. For most companies that will be for tax year 2015 (relating to financial year 2014) unless these jurisdictions achieve a better rating during financial year 2014 (“partially compliant” or “largely compliant”).  In particular, Luxembourg has stated it is firmly committed to moving forward with transparency and the exchange of information for tax purposes, while ensuring that legal requirements and the protection of privacy are fully respected.

Payments to Austria and Turkey, the two jurisdictions that received a partially compliant rating, are not concerned by the reporting obligation.

It is to be noted that fourteen other jurisdictions were not given a compliance rating in the peer review, pending further improvements to their legal and regulatory frameworks for exchange of information in tax matters.  These are Botswana, Brunei, Dominica, Guatemala, Lebanon, Liberia, Marshall Islands, Nauru, Niue, Panama, Switzerland, Trinidad and Tobago, the United Arab Emirates and Vanuatu. As long as their review is not finalized, they are not targeted by the reporting obligation either.

Marc Quaghebeur
De Broeck Van Laere & Partners
5 March 2014

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