In a decision of 29 June 2016, the Court of First instance of Namur ruled, among others, on the question whether the Belgian tax administration must inform a taxpayer of his right to invoke the mutual agreement procedure in order to avoid double taxation (article 24(3) of the Belgium – France Income Tax Treaty 1964 (the Treaty)). Details of the case are summarized below.
(a) Facts. The taxpayer lived near the French border, was married and worked for the Belgian railways. He deregistered from his local commune in 2006 and registered in a border commune in France where he rented a small apartment, claiming the benefits of the border worker regime (i.e. taxation in France). His spouse and children, from which he supposedly had factually been separated, remained living in Belgium. He was effectively taxed in France.
However, the Belgian tax administration was of the opinion that his residence in France was a fraud and that the taxpayer was fully taxable in Belgium on his professional income. In 2010, the tax administration assessed accordingly.
The taxpayer filed a notice of objection which was rejected in 2014 (i.e. after 4 years the assessment)
(b) Legal background. Article 24(3) of the Treaty prescribes that a mutual agreement procedure must be invoked within a period of six months from the date of the notification of the second assessment. If the objection appears to be justified to the authorities dealing with such a claim they shall consult together with the competent authorities of the other Contracting State with a view to the avoidance of double taxation.
The time-limit to invoke the mutual agreement procedure had clearly expired.
(c) Issue. The court had, in addition to the main question whether the taxpayer was indeed a border worker for purpose of article 11(2)c of the Belgium – France Income Tax Treaty 1964, also to rule on the question whether the Belgian tax administration, under the principle of good administration (a breach giving rise to compensation for damages), had to inform the taxpayer of the possibility to invoke the mutual agreement procedure provided for in article 24(3) of the Belgium – France Income Tax Treaty 1964.
(d) Decision. Based on the facts presented by the tax administration it was clear for the court of first instance of Namur that the taxpayer had remained his residence in Belgium. The facts also revealed that the tax administration did not, in a timely manner, inform the taxpayer about the possibility to invoke the mutual agreement procedure and, thus, thereby avoiding double taxation.
Although it is indeed a legal requirement to substantially motivate a tax assessment and to mentioned the remedies against the assessment available for the taxpayer, this is, according to the court, not the case for the mutual agreement procedure, which does not constitute a regular remedy against the assessment as such. According to the court, a mutual agreement procedure solely allows the taxpayer to seize the tax administration of the country of which he is a resident in order to settle a situation of double taxation.
There is, according to the court of first instance, no legal provision requiring the tax administration to inform taxpayers of the possibility to invoking a mutual agreement procedure to avoid double taxation. The taxpayer has not demonstrated that any normally diligent and prudent tax official would necessarily have informed a taxpayer about such a possibility.