Prior: the judgment of the Ghent Court of Appeal
In September 2018, the Court of Appeal of Ghent declared a person guilty of tax evasion.
This person had admitted, as part of a regularization procedure and during interrogation, that he, as a natural person, was the ultimate beneficiary of movable income from three offshore structures. These foreign structures were transparent since he always disposed of money on the Luxembourg and Monegasque accounts of those structures. According to the Court of Appeal, the structures did not have any economic ‘substance’ and were abused by the accused solely for personal benefit. According to the Court of Appeal, the accused, on the basis of the income tax code, was therefore obliged to declare dividends, interests and advances obtained abroad on a liquidation bonus.
Based on this justification, the Court of Appeal condemned the accused because he had not included the movable income from Luxembourg and Monaco in his annual income tax return (income years 2006 to 2012) and had ‘forgotten’ ticking the questionable foreign accounts since 2007.
Court of Cassation
Vision of the claimant
The convicted person appealed in cassation against this conviction. Especially the first part of the first plea in this cassation appeal is interesting. The convict (cassation appellant) argued that the judges of the Court of Appeal should not have condemned him because he should not have indicated the bills or the income from the constructions in his personal income tax. According to the plaintiff this was only compulsory for income from 1 January 2015 (the so-called Cayman tax or See-through tax).
Therefore, according to cassation appellant, there was no violation of the tax code which is nevertheless required for a conviction for tax evasion.
Answer from the Court of Cassation
The Court of Cassation rejected the claimant’s reasoning in very clear terms.
According to the Court, the tax provisions with regard to the declaration of taxable income apply to all conduct aimed at the evasion of income tax. As soon as there is any violation of the provisions of the income tax code committed with the intention of cheating or damaging, there is punishable tax evasion.
The applicable tax provisions showed that Belgian taxpayers had to include their income in their annual personal income tax return, including foreign income such as income in the name of foreign legal constructions or legal entities that were only used to conceal the fact that the Belgian taxpayer was actually beneficiary. The beneficiary Belgian taxpayers also had to mention all foreign accounts of which they had been the actual holder at a foreign financial institution.
The Court of Cassation decides that the cassation appellant mistakenly assumes that the legislative amendments of 2015, introduced new tax declarations or taxable bases. The legislative changes only specified the already existing obligations to include taxable movable income earned abroad in the annual personal income tax return.
Cfr: Cass. 26 February 2019, AR P.18.1040.N
© Ruben VAN HERPE