Court of cassation puts breaks on use of anti-abuse rules
On 25 November 2021, the Court of cassation rendered two important decisions on the application of Belgian and EU anti-abuse rules, thereby limiting the attempts by the Tax Authorities to apply these anti-abuse rules in a very broad manner.
1. Temporal scope of application of Article 344, §1 ITC
Article 344, §1 applies to legal acts which took place as of assessment year 2013 (and also to legal acts which took place in a taxable period that ended on or after 6 April 2012 and related to assessment year 2012). Article 344, §1 ITC can also be applied if a “series of legal acts” combined constitutes fiscal abuse.
The Court ruled that the Tax Authorities cannot apply Article 344, §1 ITC in case some of the legal acts that form part of a “series of legal acts” already took place before the entry into force of this article.
The Court also ruled that in case a Court of appeals annuls a tax assessment because of a violation of the temporal scope of application of Article 344 §1 ITC, it can deny the Tax Authorities the possibility to establish a so-called “subsidiary tax assessment”. This means in practice that a Court of appeals can prevent the Tax Authorities from issuing a subsidiary assessment based on the argument that only the steps in the series of legal acts which took place as of 2012 would constitute fiscal abuse.
2. In a domestic context, the application of Article 344, §1 ITC cannot be set aside by a general principle of abuse under EU law
The second case related to the application of the notional interest deduction in 2010, i.e. before the entry into force of Article 344, §1 ITC. The Tax Authorities did, among other things, try to deny the deduction on the basis of the general principle of abuse of law as established by the Court of Justice of the EU.
According to the Court of cassation, the Tax Authorities can only apply the EU principle of anti-abuse in case a taxpayer tries to obtain a tax benefit under EU law. Hence, this EU principle of anti-abuse cannot be invoked in a purely Belgian context (such as e.g. when a taxpayer applies the Belgian notional interest deduction).
The key learning is that in a purely domestic tax context, in order to invoke fiscal abuse, the Tax Authorities must produce the evidence showing that the conditions provided for by Article 344, §1 ITC are met (unless a specific anti-abuse provision applies).
