Meanwhile, practice shows that the Belgian tax authorities are systematically investigating Belgian taxpayers with bank accounts in Turkey. Indeed, Turkey has shared financial data for 2019, 2020 and 2021 with the tax authorities, as announced previously in our newsletter. This was recently confirmed by the finance minister in a parliamentary question. When rectifying undeclared foreign movable income, the tax authorities apply a 50% tax increase by default (although case law rejects such default application). The minister now states that the amount of the fine and/or tax increase is "determined by the facts specific to each individual case".
If you are facing such investigations and fines, we advise you to be extremely vigilant. Contact our litigation team if you have any questions or would like assistance.
Morocco will (soon) exchange financial data of Belgian residents with accounts at Moroccan financial institutions, while Turkey is already conducting such exchange of information. The data will be transferred to the Belgian tax authorities. These developments are not without significance for Belgian taxpayers with accounts at Moroccan or Turkish financial institutions. Belgian tax authorities may subject taxpayers on whom information is received to audits. In case of non-declaration of foreign accounts or income, potentially (severe) tax and financial consequences may emerge for these taxpayers.
Background
The automatic exchange of citizens' financial data between countries based on the Common Reporting Standard (CRS) is a global standard on the automatic exchange of data since 2017. The CRS is an international standard aimed at increasing tax transparency globally. Simply put, CRS disclosures relate to financial data such as bank accounts, interest or dividend income, the values of capital and life insurance policies, proceeds from the sale of financial products, etc.
Recent developments show that Morocco and Turkey too are now complying with the internationally accepted CRS standard. Henceforth, financial data of residents of EU countries will be shared by Morocco and Turkey. Specifically, the financial data of, say, Belgian residents with accounts at a Moroccan or Turkish financial institution will be transferred by the Moroccan or Turkish authorities to the Belgian tax authorities.
Turkey
Turkish financial institutions are required to report information on accounts, account holders, balances and income such as interest, dividends and capital gains, as well as benefits under life and capital insurance and pension contracts, to the Turkish authorities. Under certain conditions, Turkish financial institutions are also required to provide such information on company accounts to the countries of residence of the company's shareholders.
Morocco
Morocco has also made the necessary legislative changes to enable CRS exchange. The start date of the CRS exchange by the Moroccan authorities has been set at September 2021 or September 2022 (this is still unclear at present). This means that Morocco will exchange the financial data of Belgian residents with accounts at Moroccan financial institutions for income year 2021 from September 2022 at the latest. However, Morocco has recently announced a postponement of the deadline of September 2022. Our litigation team will further monitor these developments for you.
What do these developments mean for you?
If the Belgian tax authorities receive a CRS notification from abroad that concerns you, you will be able to view this CRS sheet on MyMinFin.
In principle, if you have reported your foreign accounts and the income on these accounts in your Belgian personal income tax return, there will be little issue.
If you have not declared your foreign accounts and the income on these accounts, the Belgian tax authorities will usually take the position that you have not complied with your declaration obligations. The Belgian tax authorities can then tax the undeclared income as well as impose administrative fines and tax increases. Practice shows that the tax authorities apply a 50% tax increase by default based on an internal instruction. In such case, the tax authorities believe that the non-declaration of foreign accounts and/or movable income is by definition an indication of fraud. However, recent (lower) case law states - correctly - that a 50% tax increase should not be imposed automatically in such cases if the tax authorities do not cite concrete elements showing a particular intent to defraud. The default application of a 50% tax increase is - depending on the concrete circumstances - not simply to be accepted and potentially contestable.
Furthermore, in practice, it is observed that the Belgian tax authorities send (extensive) questionnaires to Belgian taxpayers about whom information has been received from abroad (which does not match the information already known to the Belgian tax administration on the basis of the submitted personal income tax return). This extensive questionnaire usually relates to various aspects of the assets, including foreign real estate, other contracts with financial institutions, mandates, as well as Belgian assets (bank accounts, policies, other contracts). As part of such an investigation, the Belgian tax authorities may also seek to extend the assessment and investigation periods from three to five or seven years. Specifically, the Belgian tax authorities will investigate your assets and income up to three, five or seven years back.
The CRS exchange could therefore have potentially heavy tax and/or financial consequences. If you would like advice on your rights and/or assistance with audits by the tax authorities, you can always contact our specialised litigation team.