Partial withholding tax exemptions: new audit wave 2023 initiated

Partial withholding tax exemptions: new audit wave 2023 initiated

Gradually, the Belgian tax authorities are sending out the first tax inquiries regarding the partial withholding tax exemptions for income/tax year 2023. In particular, and in accordance with last year, the partial withholding tax exemptions with respect to research and development, night & shift work, shift work for construction activities and overtime and are the main focus areas. By carrying out these tax audits, the Belgian tax authorities would like to guarantee the equal treatment of the different tax payers and avoid any potential misuse of these measurements.
 

Process

The Belgian tax authorities usually initiate tax audits by sending out information requests, for which the corresponding input in principle needs to be provided within one month upon receipt of the request. Given the recent federal government formations and potentially also linked to current ongoing discussions on specific topics relating to these partial withholding tax exemptions, we have noticed a certain delay this year compared to last year(s) in the kick-off of these tax inquiries. Potentially it will also imply that any future audit waves may occur later compared to previous years and, on top, receiving a delay to reply to such tax inquiry might become (even) more difficult.

Prior to replying to such tax inquiry an extensive review of the information requested, with a deep knowledge of the scope, as well as an analysis of the data available within the company are imperative to handle the queries correctly and efficiently.

A clear trend that we have noticed over the past few years is that the legal requirements are being verified more and more strictly. A successful audit over (a) past income year(s) does not automatically guarantee a successful tax audit relating to a more recent income year. It is therefore crucial that a proper audit file is prepared; preferably even proactive (i.e. prior to applying the withholding tax exemption) given the limited response period to such inquiry.

Another important development is that the tax inquiry for one income year could potentially even result in a new inquiry and/or corrections on applied withholding tax exemptions over the past income years given some (recent) legal changes.
 

Our assistance

EY has developed a solid approach towards the Belgian tax authorities in order to safeguard all different types of partial withholding tax exemptions. This implies that we can assist you with a proactive verification of the application of this measure and be your trusted business advisor in case your company is being audited.

Please do not hesitate to reach out to us in case you would require any further information or to have a non-binding discussion about it.