Illegality of the benefit in kind resulting from the free provision of a building: the circular has been published
Since 2012, the flat rate tax base resulting from the provision of a building free of charge by a company to a physical person (often its managing director) has been doubled.
When the cadastral income of the building or part of a building which is the subject of the provision is higher than 745 EUR, the tax base is 380/60 of the index-linked cadastral income, which can lead to very high tax bases, and can even collectively exceed the rental value of the building.
The Courts of Appeal of Ghent and Antwerp recently considered that this flat rate valuation contravened the principle of the equality of all Belgians before tax, enshrined in article 170 of the Constitution, on the grounds that when a physical person makes a building available to another within the framework of a working relationship, the resulting benefit in kind is set at 100/60 of the index-linked cadastral income, regardless of the amount, and that nothing justifies such a difference in approach when it is a company that makes the building available.
The tax authority bows…
Questioned about the attitude of the tax authorities in the face of these rulings, the Minister of Finance recently stated in the pages of a major daily newspaper that the tax administration has bowed to them and that an administrative circular (circular 2018/C/57 of 15 May 2018 available on the site fisconet.be) has just been published on this subject.
Within it, the tax authorities confirm that from now on, and until an eventual future amendment to the legal text, they will apply the flat rate tax base of 100/60 on index-linked cadastral income for the provision of any building, whether by a physical person or a company and regardless of the amount of the cadastral income of the building which is the subject of such provision.
This administrative position is already being applied to pending litigation, and we have already been able to check this on several occasions.
This excellent news for the future begs the question about the past.
What to declare?
First of all, with regards to revenue relating to 2017, the best solution seems to be to declare the benefit on the basis of the new administrative position, even if this involves sending the tax authorities modified salary slips and summary statements.
File a claim?
Then, any taxpayer who has been taxed on an illegal basis can file a claim, even against his or her own tax return, within 6 months of sending the notice of assessment – tax certificate. We strongly advise taxpayers in this situation to file such a claim.
What about requests for systematic rebates?
Can we furthermore introduce a request for a systematic rebate for any tax based on this illegal benefit in kind, retroactive over 5 years, in consideration that this reversal of the position of the tax authorities is a new fact, which is one of the elements on which a request for a systematic rebate can be based.
Unsurprisingly, the circular states the contrary and it seems that we can accept that the authorities will not easily entertain such requests. But are they right about this point?
Certainly, article 376 § 2 of the C.I.R. stipulates that a new means of law or a reversal of jurisprudence do not constitute new facts. However, a judgement of the Constitutional Court enshrining the unconstitutionality of a legal provision constitutes, under consistent jurisprudence, a new fact.
The Constitutional Court is not competent to rule on the illegality of a royal decree, for which reason it has not been applied to by the two courts of appeal that made the two decisions behind the change in position of the authorities and the new administrative circular.
It dos nevertheless seems conceivable to file a request for a systematic rebate by assimilating on the one hand the two decisions referred to above with the judgements of the Constitutional Court and considering on the other hand that the public recognition by the Minister of Finance of the unconstitutionality of article 18, § 3, 2 of the AR/C.I.R. certainly constitutes a new fact.
We can no doubt look forward to engaging in a battle on this point, but does fortune not favour the brave?