Transposition of ATAD GAAR in Belgium

Studi Tributari Europei. Vol.9 (2019)
ISSN 2036-3583

Transposition of ATAD GAAR in Belgium

Philippe MalherbeUniversité Catholique de Louvain (country)

Professor, CRIDES, School of Law, UCLouvain Avocat, Brussels Bar

Submitted: 2020-04-15 – Accepted: 2020-08-06 – Published: 2020-07-21

In Belgium, the general anti abuse rule in matters of corporate income tax included in the anti-tax abuse directive has not been specifically transposed. We can however admit that the existing domestic rule against abuse in matters of income tax, viz. art. 344 § 1 of the Code of Income taxes, constitutes an adequate transposition.

Keywords: taxation; Belgium; abuse; ATAD; transposition.

1 Introduction

Taxable events are defined by the statute, which implies that the line between what is taxable and what is not is often a thin one. Clever or astute taxpayers can fashion the facts so as to land on the right side of that line. That is the doctrine of the lawful choice of the least taxed way.1

The classic view was that, since taxes are defined by the legislator, that legislator was to react if he perceived abuse.2 By definition, he was always one move behind in that chess game, which entailed loss of revenue in the meantime, let alone perceived unfairness. That result was judged preferable to the legally uncertain situation where taxation would be left to the discretion or arbitrary of the tax administration, even under the slow and expensive control of the judge.

That view has been shaken in many countries and so-called general anti abuse rules have emerged, to the detriment of the principles of legality of taxes and of legal certainty, the latter concern being sometimes alleviated by a system of tax rulings.3 The need for such rules must be assessed in each country against the case law status concerning tax abuse cases, taking into account traditions as to principles of legal interpretation;4 the drafting of such rules must comply with national constitutional rules.

In its infinite wisdom and in the wake of the OECD/G20 BEPS project, the European lawmaker has determined that a harmonized general anti abuse rule was necessary for the well-being of the internal market and inscribed such a rule in article 6 of the Council Directive (EU) 2016/1164 of 12 July 2016 laying down rules against tax avoidance practices that directly affect the functioning of the internal market.

Recital 3 states: "It is necessary to lay down rules in order to strengthen the average level of protection against aggressive tax planning5 in the internal market. As these rules would have to fit in 28 separate corporate tax systems, they should be limited to general provisions and leave the implementation to Member States as they are better placed to shape the specific elements of those rules in a way that fits best their corporate tax systems. This objective could be achieved by creating a minimum level of protection for national corporate tax systems against tax avoidance practices across the Union. It is therefore necessary to coordinate the responses of Member States in implementing the outputs of the 15 OECD Action Items against BEPS with the aim to improve the effectiveness of the internal market as a whole in tackling tax avoidance practices. It is therefore necessary to set a common minimum level of protection for the internal market in specific fields."

Recital 11 however reaffirms the principle of the free choice of the least taxed way: “Within the Union, GAARs should be applied to arrangements that are not genuine; otherwise, the taxpayer should have the right to choose the most tax efficient structure for its commercial affairs.

That directive has solid political ground: fighting abusive practices of MNEs is dans l’air du temps and making foreign corporations pay more taxes is a welcome idea for taxpayers in each Member State. The required unanimity was gathered at the Council: who would dare be seen opposing the fight against abuse? The terrorist element inherent in the legal fight against tax abuse also applies to lawmakers.

Whether that directive has equally solid legal ground has been disputed, often convincingly.6 The legal position of a domestic statute transposing an illegal directive will raise interesting issues of domestic constitutional law7 as well as of EU primary law.

The directive was to be transposed by 31 December 2019. Belgium announced a new text8 but eventually did nothing, implicitly considering that its existing legislation was adequate transposition.

2 The texts

2.1 ATAD

Article 6 of the ATAD directive9 provides:

Fig. 1 Multilingual version

2.2 Belgian GAAR

Since 201210 the Belgian GAAR in the Code of Income Taxes provides11:

Fig. 2 Belgian GAAR

Which can be unofficially translated as follows:

§ 1. The legal act or set of legal acts performing the same transaction may not be opposed to the administration when the administration demonstrates by presumptions or by other means of proof referred to in Article 340 and in the light of objective circumstances, that there is tax abuse.

Tax abuse shall exist where the taxpayer carries out, by means of the legal act or set of legal acts that he has performed, one of the following transactions:

(1) a transaction by which the taxpayer places himself, in violation of the objectives of a provision of this Code or of the decrees issued in execution thereof, outside the scope of that provision; or

(2) a transaction by which he claims a tax advantage provided by a disposition of this Code or of the decrees issued in execution thereof, the granting of which would be contrary to the objectives of this provision and the essential purpose of which is to obtain this advantage.

It is incumbent on the taxpayer to prove that the choice of this legal act or set of legal acts is justified on grounds other than the desire to avoid income tax.

Where the taxpayer does not provide proof to the contrary, the tax base and the calculation of the tax shall be re-established in such a way that the transaction is subject to a levy in accordance with the purpose of the law, as if the abuse had not taken place.

In a nutshell, the statute provides that there is fiscal abuse when the administration shows by means of evidence and by objective circumstances that, by a legal action or a set of legal actions, the taxpayer effects a transaction in order to avoid falling within the scope of a provision of the Code contrary to the objectives of that provision (first form12). The taxpayer may however prove that the actions were warranted by other motives than to avoid income tax. Otherwise, the tax base and calculation are re-established so that the transaction is liable to a levy in conformity to the purpose of the law, as if the abuse had not taken place.

3 Analysis

Let us break down the ATAD text and check whether the Belgian rule constitutes adequate transposition: