Minimum taxable base once again withstands Constitutional Court scrutiny

Starting from tax year 2019, corporate taxation includes a deduction limitation in the context of tax adjustments, referred to as the 'minimum taxable base.' When the tax administration adjusts the taxpayer’s taxable result, these changes constitute a so-called minimum taxable base, provided that the changes are accompanied by a tax increase of at least 10%. In such cases, the taxpayer will not be able to offset the adjusted result with available tax deductions (such as carried forward losses), except for the current year's dividends received deduction (current article 206/3, §1, second paragraph ITC).

The application of the minimum taxable base depends on whether the tax administration imposes a tax increase of 10% or more. Regarding the imposition of a minimum tax increase of 10%, the legislation (according to the prevailing administrative practice and case law) provides a discretionary possibility for the tax administration to waive the tax increase in the absence of bad faith. The discretionary power raised the question whether this regulation is in accordance with the principle of fiscal legality. To this end, the Court of Appeal in Antwerp referred a preliminary question to the Constitutional Court. In a judgment dated 19 June 2025 (n° 90/2025), the Constitutional Court ruled on this matter and concluded that there is no violation of the principle of fiscal legality.

The legislation is sufficiently foreseeable and includes adequate safeguards for the taxpayer

The principle of fiscal legality requires that the essential elements of taxation be regulated by law, as reaffirmed by the Constitutional Court. 

Furthermore, it follows from the principle of fiscal legality that, in the application of tax law, excessive discretionary power should not be left to the tax administration and/or the judiciary power. A limited margin of discretion for the tax administration is permissible, provided it is exercised under judicial supervision.

As previously mentioned, the minimum taxable base will only be applicable insofar as the tax administration imposes a tax increase of at least 10%. Even though the tax administration has long had the discretionary power to waive the minimum tax increase in the absence of bad faith, this power has gained considerable importance in practice since the introduction of the minimum taxable base. The Constitutional Court confirms that the discretionary power granted to the tax administration can indeed have an impact on the final tax amount due, given its influence on the taxable base, one of the essential elements of taxation that should be regulated by law.

Even though the discretionary power of the tax administration around tax increases also has an impact on the final tax amount due, the Constitutional Court is of the opinion that there is no violation of the principle of fiscal legality. According to the Constitutional Court, only limited discretionary power is concerned, where the legislator has wisely refrained from establishing precise criteria so that the tax administration can take into account all factual circumstances. Moreover, the Constitutional Court also sees sufficient safeguards against an arbitrary application of this discretionary power. The tax administration is indeed bound by the general principles of proper administration, and the imposed tax increase can always be reviewed by the court.

Going forward: Judicial review of tax sanctions becomes increasingly important

The Constitutional Court’s ruling does not provide a satisfactory outcome for tax controversy practice, where taxpayers often find themselves confronted with a rigid tax administration. Furthermore, the reasoning by the Constitutional Court seems difficult to reconcile with the fundamental principles of tax law (e.g., the dichotomy between, on the one hand, prohibiting excessive discretionary authority and yet, on the other hand, judging that the legislator 'rightly' did not provide specific criteria).

The Constitutional Court attaches great importance to the role of judicial review on imposed tax increases, and therefore also, indirectly, on the application of the minimum taxable base. In practice, tax courts often also raise questions about the, sometimes, far-reaching consequences of these measures for taxpayers, which also explains why several preliminary questions have already been referred to the Constitutional Court (even today, several cases are still pending). It is therefore not surprising that the role of judicial review will become even more important in the aftermath of this ruling. It can be expected that the courts will increasingly consider themselves responsible for addressing any disproportionate situations in the future. To this end, they may, for example, annul imposed tax increases or reduce them to less than 10%, thereby preventing a disproportionate application of the minimum taxable base.

Also significant in this context is the draft law submitted by the federal government, which aims to revise the regulations concerning tax increases. According to the current draft, the tax administration may no longer impose a tax increase for a first offence committed in good faith. In principle, good faith will be presumed. While this can be applauded, it should also be noted that under the proposed changes, a second offence, even in good faith, will be penalised with a 20% tax increase. Moreover, the presumption of good faith will not apply when taxpayers filed their tax return after the deadline.