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Reporting obligation of foreign legal structures

Reporting obligation of foreign legal structures

The Program  Law of 30 July 2013 introduced the obligation to report foreign private legal structures in your annual income tax returns. This obligation applies as from assessment year 2014 (income of the year 2013).

 

Every Belgian resident needs to report all foreign legal structures of which he, his wife or his children (whom he has the legal enjoyment of the income) are the founder, the beneficiary or the potential beneficiary, in his annual tax return.

The so called “legal structures” are defined in the Belgian Income Tax Code as:

  • on the one hand structures  similar to the trusts ;
  • on the other hand foreign legal entities which are not subject to income taxes (entities in tax paradises) or which are subject to a significantly more favorable tax regime than the one in Belgium.

 

The second category of “legal structures” is specified in the Royal Decree of 19 march 2014. The Royal Decree contains a list of 69 private legal structures who are assumed not to be subject to any income tax or who are assumed to be subject to an income tax that is significantly more favorable than in Belgium. All entities on the list need to be reported. The new legislation only aims at private legal structures.

 

There are still some questions left since the legislator hasn’t been very clear. First of all it’s not clear whether the list is exhaustive or indicative. Most authors assume that it’s an exhaustive list. Secondly it’s not clear if the Belgian taxpayer can refute  the presumption by proving that the “legal structure” was subject to an income tax that is not significantly favorable. Most authors state that the list creates a conclusive presumption. The Belgian taxpayer is obligated to report the legal structures on the list anyway.

 

We can conclude that there are still many unanswered questions . We will have to wait until the legislator or the tax administration clarifies things.