Not the Panama Papers or other tax scandals, but the corona crisis has led our country to link tax benefits for the first time to a ban on constructions in tax havens. For example, companies cannot claim the measure on the advance payment of corporate tax if they have a subsidiary in a tax haven or if they have made payments of € 100,000 or more to companies in tax havens, unless it concerns payments with a ‘legitimate financial or economic reason ‘.
Why not also impose that condition on state aid to companies such as Brussels Airlines?
Finance Minister Alexander De Croo (Open VLD) warns that the tax authorities will use all available data to check this. “The tax authorities will check next year as soon as the returns on 2020 income are received,” says its spokeswoman Lotte Van der Stockt. ‘It is already difficult to give an indication of how many companies this concerns. But it is quite easy to control. The tax authorities can simply check the participations in the full annual accounts to see if a subsidiary is in a tax paradise. And all payments to tax havens must be reported from 100,000 euros anyway. It is up to the taxpayer to demonstrate that those payments meet legitimate needs. The tax authorities also have more insight into foreign accounts thanks to the increasing exchange of that data with other countries. ‘
Mickey Mouse paradises
Professor of Tax Law Luc De Broe (KU Leuven) believes that quite a few companies are in danger of falling by the wayside. Our country does not use the European but the Belgian list of tax havens as a reference. De Broe: ‘There is only a negligible number of countries on the European list. On the Belgian list are 30 countries, not only “Mickey Mouse tax havens”, which means the range of companies that are in danger of falling out is much larger. ”
790 companies reported payments to those 30 tax havens last year, amounting to more than 172 billion euros. De Broe: ‘So it’s simple: who has declared such a payment for the period for which he wants to claim the Covid tax benefit will be fine facie, unless he can demonstrate that the payment was made for good reason. . ”
De Broe predicts that the link to tax havens will now also be applied for other specific tax benefits. “Perhaps it will be a keeper to use Marc Van Ranst’s terminology. I think that is a logical evolution: for what should what. ”
His colleague top tax specialist Axel Haelterman (KU Leuven) agrees. “This is pushing companies into the reality that contacts with tax havens must be justifiable if they want to enjoy other tax benefits. It also supports the credibility of tax measures to the wider population, which is at least as important. ”
“I also think the link makes sense when we give state aid, for example to Brussels Airlines,” says De Broe. “You’re not going to give hundreds of millions to a company that may be draining the funds to a tax haven. That doesn’t work. ” The German group Lufthansa, which includes Brussels Airlines, has several companies in tax havens such as Panama and the Cayman Islands.