New adapted circular letter on the anti-abuse provision for registration duties and inheritance taxes published

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We already informed you in a previous tax alert about the new anti-abuse provision for registration duties and inheritance tax purposes, which was introduced in the Program Law of 29 March 2012. In this respect a first circular letter was published by the tax authorities, which only contained a general and theoretical overview of the new provision (click here for our tax alert about this first circular).

In July 2012 a new circular letter was published (circular letter nr. 8/2012 dd. 19 July 2012) which gave some additional comments on the first circular letter. This second circular letter listed some examples of transactions indicating whether or not they are likely to constitute abuse of tax law.

On 10 April 2013, a new circular letter has been issued which replaces the previous circular letter of July 2012 (click for the full text of the circular: in Dutch / in French). This new circular letter contains an additional paragraph dedicated to the testamentary provisions and an adapted list of examples of transactions indicating whether or not they are likely to constitute any abuse of tax law. For the transactions listed as being likely to constitute any abuse of tax law, the new circular also indicates how the transaction will be taxed in the event that the taxpayer cannot demonstrate the existence of other motives than tax evading.

Testator in inheritance tax is not the taxpayer
According to the new circular letter, the anti-abuse provision can only apply to transactions performed by the taxpayer himself. Considering that in testamentary provisions, the testator is never the taxpayer for the application of the inheritance tax, transactions set in testamentary provisions cannot fall under the anti-abuse provision. For that reason, all examples of (no) abuse of tax law from the previous circular referring to testamentary provisions are removed from the new circular letter.

Non-exhaustive lists
Like in the circular letters of March and July 2012, the new circular letter confirms that the assessment of the existence of abuse of tax law must be done on a case-by-case basis. As a result, it is not possible for the tax authorities to provide for an exhaustive list of safe c.q. suspicious transactions.

However, the administrative circular letter lists some transactions which are likely or not to constitute abuse of tax law according to the tax authorities. Please note that the examples on the black list can be countered if the taxpayer can justify that the transaction has been set up for other reasons than the avoidance of tax.

Possible abuse of tax law
The following transactions (among others) are considered to constitute abuse of tax law. We have also included what the taxation will be in absence of non tax motives according to the new circular letter:

Transactions likely to constitute abuse of tax law (black list)
Sterfhuisclausule Clause de la mortuaire Distribution clause of community property to one specific spouse (even if not the surviving spouse)
→ Inheritance tax levied on ½ of the community allocated to the spouse/beneficiary
Erfpachtconstructies tussen gelieerde vennootschappen Constructions emphythéotiques entre sociétés affiliées Long term lease constructions between affiliated companies
→ Registration duty of 10% (Flemish Region) and 12,5% (Brussels Capital Region and Walloon Region) on the fair market value of the whole estate (not only on the ground)
Inbreng van een goed in het gemeenschappelijk vermogen door één echtgenoot onmiddellijk of binnen korte tijdspanne gevolgd door de schenking van dit goed door beide echtgenoten Apport par un époux d’un bien à une communauté matrimoniale, suivi, immédiatement ou à bref délai, de la donation de ce bien par les deux époux ensemble Transfer of assets by one spouse into a matrimonial community, followed by the donation of the same assets by both spouses through the community within a short period of time
→ Calculation of gift tax as if the assets would have been donated by the first spouse only, without considering the transfer into the matrimonial community
Uitbreng uit de huwelijksgemeenschap van goederen, gevolgd door een wederzijdse schenking van dezelfde goederen tussen echtgenoten onder ontbindende voorwaarde van vooroverlijden van elke begiftigde Sortie de biens d’une communauté matrimoniale, suivie de la donation mutuelle des mêmes biens entre époux, sous condition résolutoire du prédécès de chaque donataire Transfer of assets from a matrimonial community to each spouse in private, followed by a mutual donation of the same assets between spouses under resolutive condition of the decease of each beneficiary
→ Collection of inheritance tax at the time of death of the surviving spouse, on ½ of the assets concerned
(NIEUW) Verzaking door een langstlevende echtgenoot aan zijn erfrechtelijk vruchtgebruik op het gedeelte nagelaten door de vooroverleden echtgenoot in een Belgisch onroerend goed (in beginsel vrijgesteld van registratierechten), gevolgd op korte termijn door de schenking door de langstlevende echtgenoot van zijn rechten in volle eigendom in hetzelfde onroerend goed aan de begunstigden van de verzaking aan het erfrechtelijk vruchtgebruik (NOUVEAU) Renonciation par un conjoint survivant à son usufruit successoral sur la partie d’un bien immeuble belge laissé par son conjoint prédécédé (en principe exemptée de droit d’enregistrement), suivie de la donation par le conjoint survivant, à bref délai, de ses droits en pleine propriété dans le même immeuble aux bénéficiaires de la renonciation à l’usufruit (NEW) Waiver by a surviving spouse to his/her usufruct inherited on the share left by their deceased spouse in real estate in Belgium (in principle exempt from registration duty), followed within a short period of time by the donation by the surviving spouse of his/her own share in full property in the same real estate to the beneficiaries of the waiver of usufruct
→ Collection of gift tax on the fair market value of the waived usufruct and on the donated full property

The following transactions have been removed from the previous black list established by the tax authorities:

Alle testamentaire bepalingen Toutes les dispositions testamentaires All testamentary provisions
Gesplitste aankoop van goederen voorafgegaan door de schenking van geldmiddelen door de verkrijger van het vruchtgebruik aan de verkrijger van de blote eigendom met eenheid van opzet Acquisition scindée précédée par une donation de fonds par l’acquéreur de l’usufruit à l’acquéreur de la nue-propriété avec unité d’intention Split purchase of property preceded by the donation of money by the buyer of the usufruct to the buyer of the bare property with unity of intent

We would like to point your attention to the fact that the transactions removed from the black list have not been transferred to the white list. The circular letter makes clear that a testamentary provision can no longer constitute any abuse of tax law. However, for the split purchase of real estate in Belgium preceded by the donation of money by the buyer of the usufruct to the buyer of the bare property, the situation remains unclear. Our Personal Services Team will of course keep you informed of any new developments on the matter.

No abuse of tax law
The following transactions (among others) are considered not to constitute abuse of tax law (unless they are part of a broader abusive construction):

Transactions not likely to constitute any abuse of tax law (white list)
Handgift/bankgift Donations manuelles ou effectuées par virement bancaire Manual donation/ Donation made by bank transfer
Schenking voor een buitenlandse notaris Donations devant un notaire étranger Donation executed in front of a foreign notary
Gefaseerde schenking van onroerende goederen Donations échelonnées des biens immobiliers Successive partial donations of Belgian immovable property
Schenking met voorbehoud van vruchtgebruik of ander levenslang recht Donations avec réserve d’usufruit ou d’un autre droit viager Donations with retention of usufruct or any other lifetime right
Tontine- en aanwasclausules Clauses de tontine et d’accroissement Accruer and accretion clauses

For more information, please contact the members of the EY Personal Tax Services department