Supreme Court ruling on reporting of foreign-source income
Global Employer Services | Reward & Mobility Alert
On 2 March 2023, the Belgian Supreme Court issued a decision (available in French only) that Belgian resident taxpayers cannot be required to provide detailed information on foreign-source income as an annex to the individual income tax return to obtain exemption from Belgian tax on that income under an applicable tax treaty.
Background
In the case at hand, the tax authorities denied exemption under the Belgium-Luxembourg treaty for certain Luxembourg-source income derived by a Belgian resident taxpayer solely due to the absence of a detailed annex to the taxpayer's Belgian individual income tax return. The authorities argued that the burden of proof lay with the taxpayer, and the lack of sufficient information hampered their ability to process the tax return adequately.
Supreme Court decision
The court ruled that the tax authorities cannot impose a requirement to report foreign-source income in an annex to the taxpayer’s Belgian individual income tax return as a condition of granting an exemption from Belgian tax on that income under an applicable tax treaty. The court emphasised that there are no legal grounds under Belgium’s treaties to justify the demand for providing details of foreign-source exempt income in an annex to the return. As a result, taxpayers have the right to decide whether to include additional information in the annex.
Deloitte Belgium comments
While the Supreme Court ruling supports the taxpayer's position in this case, taxpayers should consider the practical implications and adhere to administrative guidelines. It is still recommended to retain detailed information on foreign-source income, whether to be included as an annex to the tax return or to be provided upon the request of the tax authorities. The burden of proof remains with the taxpayer, who must demonstrate eligibility for a treaty exemption. Maintaining accurate records including such details will help facilitate the efficient processing of individual income tax returns.
