The Belgian tax authorities will use all of the information at their disposal to check that state aid linked to the coronavirus crisis is not awarded to companies that work via tax havens, federal finance minister Alexander De Croo said.
De Croo and the government have put in place a package of measures worth a total of €50 billion that includes a variety of ways to help companies ride out the crisis in the economy. But the government is adamant that taxpayer money will not be used to bail out companies that use tax havens to avoid paying Belgian tax.
For example, companies may suspend the tax payments made every quarter without suffering an interest penalty for as long as the crisis lasts, to allow themselves more flexibility in cash flow. Normally, if the quarterly payment is not made, the taxpayer (individual or company) is penalised.
That accommodation, which itself is revenue neutral, will not be allowed if a company is found to have a subsidiary in a tax haven, or has made payments of €100,000 or more to a company registered in a tax haven – unless the payment can be fully justified as legitimate.
Companies registered in tax havens are frequently shell companies consisting of nothing more than a listing and a post-office box. And payments to those companies are often payments made by one company to itself.
“The tax authorities will start checking next year, as soon as the tax returns on 2020 income are received,” finance ministry spokesperson Lotte Van der Stockt told De Tijd. “It is difficult to give an indication already of how many companies are concerned. But it will be quite easy to find out. The tax authorities also have more insight into foreign accounts thanks to the increasing exchange of data with other countries,” she said.
According to tax law expert Luc De Broe, the De Croo measures will be all the more effective as the government will be using its own list of 31 jurisdictions considered to be tax havens, rather than the European Union’s list which consists of only 12 territories.
Last year 790 companies made the obligatory declaration of payments to countries on the Belgian list, for a total value of €172 billion. Even if that were all that was involved, it would still represent a sizeable loss to Belgium’s tax income. But since payments smaller than €100,000 need not be declared, the true figure is bound to be considerably higher.
“So it’s simple,” De Broe said. “Anyone who has declared such a payment for the period for which they would like to claim the Covid tax benefit will be refused, unless they can demonstrate that the payment was made for a good reason.”
And he forecast that the measures now being introduced could have advantages for dealing with other forms of state aid separate from the coronavirus crisis.
“I think the link also makes sense when we give state aid, for example to Brussels Airlines,” he said. “You’re not going to give hundreds of millions to a company that may be siphoning the funds to a tax haven. That’s not on.”
Brussels Airlines’ parent company, the German Lufthansa Group, has several subsidiary companies in tax havens including Panama and the Cayman Islands, De Tijd points out.