Constitutional Court: notification obligation to extent limitation period in case of VAT fraud not discriminatory

On 19 January 2017, the Constitutional Court (Cour Constutionelle/Grondwettelijk Hof) gave its decision in the case of Multi Construction v. Belgian State (No. 6411 (5/2017)) which is based on a preliminary ruling request of the Ghent court of appeals. Details of the decision are summarized below.

(a) Facts. The taxpayer, a project developer for residential property, was subject to a VAT-audit on 28 October 2009, covering the period 2004-2007. On 27 November 2009, the tax administration notified the taxpayer that the extended limitation period of 7 years applies because there were indications of fraud (thus covering 2004). The same notification was repeated on 25 February 2011. On that date a protocol was drafted stating that the taxpayer had to pay 237,043 EURO VAT and a penalty of 474,080 EURO (200%).

The taxpayer argued that in order to be able to audit the extended period, in accordance with article 84ter of the Belgian VAT code, the notification had to be made before the audit actually starts. However, on 27 March 2015 the Court of Cassation has already, in a different case (AR F.12.0029.N), declined such an interpretation.

Nevertheless, the taxpayer is of the opinion that such an interpretation is contrary to the non-discrimination principle of articles 10, 11 and 172 of the Belgian Constitution. For income tax purposes, such a notification must be made before the audit starts.

(b) Issue. Given this argument, the Ghent court of appeals requested the Constitutional Court to rule whether such a difference in treatment is compatible with articles 10 and 11 (non-discrimination) of the Belgian constitution.

(c) Decision. The Constitutional Court ruled that a difference in treatment based on the application of different tax systems (including the procedural rule), even if it concerns the same factual circumstances, is not discriminatory. This would only be the case if the difference in treatment would disproportionately limit the taxpayer constitutional rights.

According to the Court this is not the case. The fact that a taxpayer, during a VAT-audit, is not being informed about certain investigation acts or is not able to circumvent or challenge those acts as long as the tax administration has not made a decision which would influence it tax position, is not without reasonable grounds. The Court refers to EcJ, 22 October 2013, C-276/12, Jiří Sabou v. Finanční ředitelství pro hlavní město Prahu.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s