Courts must be able to reduce secret commissions tax, says Belgian Constitutional Court

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On 6 June 2014, the Belgian Constitutional Court ruled that, insofar the secret commission tax constitutes a criminal penalty, the legal provision in the Belgian Income Tax Code (article 219 ITC 1992) containing this tax of 309% for corporate tax purposes is only compatible with the Constitution and the European Convention on Human Rights if it allows the Courts to reduce this tax.

Secret commissions tax

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 taxpayer on prescribed individual forms and summary forms.

In order to induce compliance with this reporting obligation and to combat tax evasion, a secret commissions tax at a fixed rate of 309% can be applied in case these items are not reported on such forms, unless the corporate taxpayer is able to prove that the payment is reported in a timely filed tax return of the beneficiary or that the income is nonetheless taxed at the level of the beneficiary within the 3-year assessment period.

This secret commissions tax is tax deductible for corporate income tax purposes.


In the case at hand, the company which was subject to the 309% secret commissions tax claimed before Court that this tax constitutes a criminal penalty. As a result, it claimed to suffer from discrimination due to the impossibility of the Court to reduce the levy, whereas judges can reduce penalties arising from common criminal law.

According to the Belgian government, on the other hand, the tax only has a compensating nature for the tax that had not been levied and, thus, is not a penalty.

In its judgment, the Constitutional Court establishes that the referring Court considers the secret commissions tax to have a penal character so that the corresponding legal protection applies. Consequently, the Constitutional Court takes into consideration the relevant provisions of the Constitution, in combination with article 6 of the European Convention on Human Rights. The latter entitles everyone subject to criminal penalties imposed by an administrative body which does not meet the criteria of that provision itself to have them reviewed by a judicial body with full jurisdiction, which has the power to cancel or reduce the penalty.

Although the legislator is free to pursue the above goals (compliance with the reporting requirement and discouragement of tax fraud) in the form of a tax instead of a penalty, this cannot lead to the curtailment of the legal protection of the taxpayer.

As a result, the provision containing the secret commission tax is only considered compatible with the constitutional principle of equality and the European Convention on Human Rights, if (it allows for a judge to review the tax with full jurisdiction, including as regards the proportionality between the infraction and the penalty.


In this judgment, the Constitutional Court now unequivocally confirms that the secret commissions tax can constitute a criminal penalty in the sense of the European Convention on Human Rights (as the Supreme Court and some Courts of Appeal did before).

Insofar this is the case, Courts and judges must be able to assess whether the application of the tax of 309% is proportional as compared to the infraction, and to choose to reduce or cancel this tax. However, this requires entering into litigation as such reduction or cancellation cannot be granted by the tax authorities on the basis of the existing legal provision (besides the cases in which the law or the administrative circular allow the tax authorities not to impose the secret commissions tax – please click here for the Tax Alert on this subject). It will depend on the facts and circumstances of each case whether such a reduction may be reasonably expected.

Do not hesitate to get in touch with the contact persons listed here or with your regular contact at EY Tax Consultants for more information or assistance in this matter.