Benefit in kind on immovable property: tax authority abides by the court ruling (for now)

The Federal Public Service Finance published Circular 2018/C/57 on 15 May 2018 on the flat-rate valuation of the benefit in kind for providing an immovable property or a part of an immovable property free of charge to employees or managers. The flat-rate estimate of these benefits is laid down by the Royal Decree implementing the Income Tax Code 1992 (RD/BITC 92). The Courts of Appeal of Ghent and Antwerp recently confirmed that the distinction to calculate the taxable benefit depending on whether that benefit is awarded by a natural person or a legal person, is unconstitutional. To correct this difference of treatment, Article 18, § 3, 2 RD/BITC 92 requires an amendment. How best to do this, is currently being considered.

Royal Decree unconstitutional, what now?
In anticipation of this legislative intervention, the tax authority has decided to abide by the above-mentioned ruling. In the event that a legal person makes a property available to an employee or manager, the taxable benefit will be estimated at 100/60 of the index-linked cadastral income of that property and, where appropriate, increased by 2/3 for a furnished property.

The tax authority further confirms that in regard to the treatment of statements of objection and legal procedures that may have arisen, it can be agreed that Article 18, § 3, 2, first paragraph, RD/BITC 92 can be applied when calculating a benefit in kind for making available an immovable property or a part thereof, irrespective of the person who makes the property available.

Remission?
What is less clear is that the same tax authority circular indicates that requests for remission will be rejected. A request for remission can be submitted within a period of five years from the first of January of the tax year, such as in the event of a new fact arising for which the late invocation for legitimate reasons is justified. According to the fiscal administration, a change in jurisprudence is not considered a new fact. It is therefore not possible to rely on the above-mentioned case-law to submit a request for remission, even after expiry of the regular objection period. This last point is somewhat open to challenge.

The law sets out that a “change in jurisprudence” cannot be considered a new fact. However, according to established case-law this does not apply to Constitutional Court judgements. Such judgements do qualify as a “new fact” on the basis of which a remission can be requested. It could be argued that the same logic applies to the above-mentioned judgements by the Courts of Appeal since the flat-rate valuation of the benefit in kind is not included in the Income Tax Code itself, but in Article 18 of the implementing decision. Since it is not possible to have the validity of a Royal Decree reviewed by the Constitutional Court (the Court is only authorised to review regulations with force of law), the courts themselves are obliged to review the legality of the provisions of the Royal Decree on the basis of Article 159 of the Judicial Code. In this particular context where the validity of a provision of a Royal Decree is reviewed against the Constitution, it could be argued that a judgement by a court of appeal, for example, in which it makes a ruling on the legality of a Royal Decree, can be equated with a judgement by the Constitutional Court.

Parliamentary question confirms “new fact”
In his response to a parliamentary question a while ago, the Minister of Finance stated that the jurisprudence to which Article 376, §2 BITC 92 refers, only consists of the interpretation and application of law provisions, the validity of which is not contested. Decisions about the validity of the law itself would for that reason form no part of the jurisprudence under Article 376, §2 BITC 92. Further to this parliamentary question, it can therefore be argued in our view that the relevant judgements represent a “new fact” because they are not excluded by Article 376, §2 BITC 92 as a “change in jurisprudence”.

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