Assessment period in case of tax fraud: New decision of the Supreme Court

Decision of 24 March 2023

In a decision rendered on 24 March 2023, the Supreme Court ("Cour de cassation"/"Hof van cassatie") confirmed that the assessment period specifically provided for in cases of tax fraud only allows the tax administration to assess tax on the portion of the income that has been fraudulently concealed, and not on the entire income declared (Cass., 24 March 2023, n° F.21.0126.N.).

In doing so, the Supreme Court sets its own "record straight", so to speak, by reversing its case law which had been constant for years on the subject.

Let us recall a few elements that are essential to understand this saga.

Ordinary, extraordinary and extended period

In principle, tax can be validly assessed until 30 June of the year following the tax year (Article 359 of the Belgian Income Tax Code of 1992 – "ITC").

However, the case brought before the Supreme Court concerned Article 354 of the ITC (in the version applicable at the time of the facts), which provided for an "extraordinary" period of 3 years to assess tax in certain specific situations: in case of (i) absence of a tax return, (ii) late submission of it, or (iii) when the tax due is higher than the one related to the declared income.

This period was extended by 2 years (i.e. a total of 5 years) where the taxpayer had committed tax fraud.

For the sake of clarity, we mention that these periods have been modified twice since the tax year covered by the commented decision, i.e. the last modification entered into force as from tax year 2023 (see our previous Newsflash).

Traditional case law...

The Supreme Court traditionally considered that the assessment made during the extended period (i.e. in case of tax fraud) could cover the entire tax, without being limited to the portion relating to fraudulently concealed income (see in particular Cass., 3 September 2004, n° F.02.0033.N.A). In other words, in case of tax fraud, the tax administration had an extended tax assessment period applicable to all income (resulting from a tax fraud or not).

...now reversed

Although this case law seemed to be firmly established for a long time, the Supreme Court has chosen to reverse it. Therefore, the extended assessment period specifically provided for in case of tax fraud can only serve to assess tax on the fraudulently concealed income. For the rest, the tax administration has to observe the ordinary period's limits without being able to evade them on the pretext of a tax fraud.

This conclusion is logical in our view, even though it took a few years for the Supreme Court to get on board. As assessment periods pose important issues in practice, this reversal is to be welcomed (especially since the assessment period in case of tax fraud has recently been extended to 10 years).

In case of questions, please do not hesitate to reach out to your regular contact within the Fieldfisher Belgium tax team.