Administrative circular adopts pragmatic approach for secret commissions tax

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A new administrative circular relating to the secret commissions tax was issued by the Finance Minister and the tax authorities on 22 July 2013 (AAFisc Nr. 30/2013 – AGFisc N° 30/2013).

The main message of the circular is that the secret commissions tax is only to be applied exceptionally in cases where the income can no longer be taxed at the level of the beneficiary.

Please click for the full text of the circular:

Secret commissions tax: the principles

The deduction of certain professional expenses (commissions, salary expenses and benefits in kind that qualify as professional income at the level of the beneficiary) is in principle subject to the condition that these expenses are reported by the payer on individual forms and summary forms. For corporate income tax purposes, a secret commissions tax of 309% is applied in case these items are not reported on such forms. Article 219 ITC 92 contains an escape clause according to which this secret commissions tax does not apply when the corporate taxpayer is able to prove that the payment is reported in a timely tax return of the beneficiary. The law of 17 June 2013 containing tax and financial provisions introduced a second legal exception, according to which the secret commission tax does not apply when beneficiary has not spontaneously reported the payment in his timely filed tax return, but the income was nonetheless taxed at the level of the beneficiary, and with the consent of the latter, within the 3-year assessment period. Under the first exception, the payment remains deductible at the level of the payer, whereas this is not the case under the second exception.

Administrative circular

Exceptional character of the secret commissions tax

The new administrative circular comments on the changes made by the abovementioned law of 17 June 2013.

The tax authorities confirm that:

  • The secret commissions tax will no longer be applied when a final tax has effectively been levied at the level of the beneficiary of the income;
  • The secret commissions tax is to be considered as an exceptional measure which is only to be applied when it is no longer possible to effectively levy a final tax at the level of the beneficiary;
  • In case of doubt regarding the approach, the tax authorities must give priority to taxing the income at the level of the beneficiary over levying the secret commissions tax at the level of the payer.

As double taxation is to be avoided as much as possible, the deduction of the payments must in principle be allowed at the level of the payer when the income is taxed at the level of the beneficiary, especially when there is no bad faith.

The tax authorities will check the application of these guidelines by the tax officials by way of random sampling.

It should be noted that legal entities not liable to normal corporate tax, but liable to legal entities tax, will always pay 33.99% in case the beneficiary is taxed outside the filing period of a tax return but within the 3 year period.

Other clarifications

The administrative circular also contains some useful clarifications on related subjects:

  • When the beneficiary is taxed on the income but this tax is not yet final (i.e. a tax claim can still be filed), the secret commissions tax will be levied.
  • The same applies when the final character of the tax at the level of the beneficiary cannot be guaranteed near the end of the assessment period.

In both abovementioned cases, an ex officio relief for the secret commissions tax will be granted when the tax at the level of the beneficiary is final;

  • The rules also apply for payments made to beneficiaries that are located abroad – hence, the secret commissions tax can be avoided by providing proof of the taxation of the income at the level of the beneficiary abroad;
  • The rules apply mutatis mutandis for the application of the legal entities tax.

Entry into application

These guidelines apply as from tax year 2014.
The circular confirms that the tax officials may act according to the spirit of the new legislation and these guidelines when addressing pending litigation and discussions relating to previous tax years insofar the assessment period for taxing the beneficiary has not lapsed.


EY Tax Consultants welcomes the pragmatic approach taken by the Finance Minister and the tax authorities in this matter.
We will follow up on developments and inform you via our Tax Alerts.