Withholding tax audits – increased focus

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Since the beginning of this year, the Belgian tax authorities have been shifting gears and added a specific audit track for the withholding tax exemptions and reductions which is now a specific target of the bulk auditing process applied to “large corporations”. It will also cascade to smaller organizations and even non-profit organizations.
If you have applied those exemptions, it is advisable to prepare for an upcoming audit.

The Belgian government has earlier announced an increased focus on the exemption or deduction of wage withholding tax applied by employers. A wide range of withholding tax exemptions/deductions exists for qualifying employers in the Belgian Tax Code. However specific conditions should be met in order to qualify for those exemptions.

A large number of companies with operations in Belgium have received lengthy questionnaires on the applied withholding tax exemptions and deductions, which are the first step of what typically becomes a detailed withholding tax audit.

All companies who have recently applied one or more withholding tax exemptions, will end up being audited on this point. The exemption/deduction of withholding tax is applicable in various domains, such as:

  • Overtime
  • Night and shift work
  • Research and development
  • General labor cost reduction
  • Etc…

The withholding tax exemption audits start with a request to complete an extensive questionnaire (vraag om inlichtingen (pdf, 209kb)  / demande de renseignement (pdf, 366kb) ).

Those tax inquiries are made of a standard questionnaire aimed at collecting relevant information for the administration to subsequently target companies for an in-depth audit.

The questionnaire is made of an impressive list starting from general questions to gradually move into more specific questions. A template of those standard questionnaires is included for your reference. The template is indicative of the methodology which shall be used to launch this audit wave but should not be considered as exhaustive.

In principle, the answers to these questionnaires need to be provided within 30 days.

It is important for Belgian taxpayers to prepare for such audit by reviewing their current policies on the exemption of withholding tax and that they have underlying supporting documentation available. This shall inevitably be viewed as a painful process but it’s probably a one off exercise since the government has recently changed the withholding tax exemption process by installing an upfront sign off process which will make post factum audits less usefull.

We have a very robust expertise for not only dealing with the administration’s new auditing process but also relevant expertise in R&D exemptions which we can leverage to support you in goring through this audit process.