In addition to the extension of the list tax havens for declaring payments made as from 1 January 2022, the minimum taxable base for companies operating under the carat tax will be increased by the amount of such undeclared payments made as from 1 July 2022.
If you make regular or substantial payments to persons or entities established in ‘tax havens’, please note below which 2 important changes you need to take into account.
I. Extension of the list of tax havens for the purpose of declaring payments
1. Which payments are subject to declaration?
Belgian companies are obliged to annually declare all payments made directly or indirectly to persons or permanent establishments established or located in a tax haven, to the extent that the total amount of such payments [all countries and beneficiaries combined] during the taxable period reaches or exceeds EUR 100.000.
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2. Which states qualify as tax havens?
For the purposes of this obligation, a state qualifies as a tax haven if it appears on at least 1 the following lists:
- – OECD list of tax havens, being ‘non-compliant’ states (the so-called back list) or ‘partially compliant’ states (the so-called grey list)
- – Belgian list of countries ‘with no or low tax’;
- – EU list of non-cooperative jurisdictions.
For tax year 2022, you will find the consolidated list below. The addition of Botswana is perhaps the most relevant change from the Belgian diamond industry perspective. Whether the payment is made to a tax haven must be assessed on the basis of the lists applicable at the date of the payment.
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3. Formalities: only a completed Form 275F will be taken into account as a valid declaration
To validly declare the payments falling within the scope of the obligation to declare, companies must complete the official Form 275 F accompanying the corporate income tax return or non-resident income tax/companies return.
References to or the use of self-prepared documents are not accepted.
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4. Sanction for non-compliance/transactions without economic substance: non-deductibility
Compliance with the declaration requirement gives rise to special rules on the tax deduction as professional expenses of such payments.
Non-compliance will result in the rejection of such payments as professional expenses.
In addition, the company must be able to proof that the payments correspond to “real and genuine transactions” and that the beneficiaries are no “artificial constructions” (i.e. without economic substance). Failure to do so will entail the same sanction, despite a valid declaration.
II. Specific impact for companies operating under the carat tax regime
Pursuant to the law of 5 July 2022, the (minimum) taxable base of companies operating under the carat tax regime will be increased with the amount of these undeclared payments made to tax havens as from 1 July 2022.
Until now, the rejection of payments subject to the declaration obligation as professional expenses had no actual impact on the companies covered by the carat tax regime, to the extent they already incurred sufficient other expenses to reach the ‘minimum floor’ as a taxable base (i.e. 0.55% of turnover from diamond trading).
If you have any further questions in this regard, please do not hesitate to contact us at info@panisgroup.com
Consolidated List of Tax Havens for Tax Year 2022
The overview can be accessed at:Â https://financien.belgium.be/sites/default/files/bbisi/lijst_van_staten.xlsx
