Over the last five years, the Ruling Committee has built up a track record for delivering speedy advance rulings on all sorts of tax issues. More importantly, it grants rulings that offer legal certainty to taxpayers and investors.
When the appointment of three board members of the Ruling Committee had to be confirmed by the government in October, the socialist party blocked the decision. They questioned whether that was a decision for a caretaker government to make. Further, they had become weary of this independent department within the Ministry of Finance that they suspected of granting tax favors that lean towards organized tax evasion.
Other departments within the Ministry of Finance also feel the Ruling Committee gives away tax concessions to taxpayers who would not normally be entitled to them. The Special Tax Inspection (in charge of combating large organized fraud) felt that companies apply for a ruling specifically to block their investigations. In particular, it fears abuses with the notional interest deduction.
Last month, the government reappointed the college members but at the same time a protocol was signed between the committee and the Central Tax Administration. This protocol must strengthen cooperation and ensure a better communication between the both.
From now on, the Ruling Committee will check its rulings with the Central Tax Administration before granting them. An advance tax ruling is binding on the other tax departments for the duration mentioned in the ruling, in general five years.
However, the effect of the ruling stops if the law changes subsequently. The protocol, therefore, emphasizes that the Central Tax Administration has the right to make recommendations to the Minister of Finance for a change in the law if a ruling has too big a budgetary impact.
Finance Minister Reynders – and Mr Pierre Wunsch in this month’s AmCham Connect – denies that this new procedure will jeopardize the independence of the Ruling Committee; we will look at the practical consequences in more detail in next month’s AmCham Connect.