CRS used as a motivator for regularisation
The Common Reporting Standards, or CRS for short, are bearing fruit increasingly for the Belgian tax authorities. Today, these are primarily used to amicably encourage you to regularise.
What is it about?
Belgium, together with more than 100 other countries, endorsed the Common Reporting Standards or CRS. This is an international agreement whereby the participating countries have committed to automatically exchanging data with each other regarding the income of their respective nationals. Based on this, the Belgian tax authorities will henceforth automatically receive information from foreign tax authorities, without having to take any initiative themselves, disclosing which Belgian nationals hold accounts or financial products (e.g. life insurances) abroad.
What do the Belgian tax authorities do?
The Belgian tax authorities link the CRS data received from abroad to your profile, and verify whether you have also reported this in your tax return. If this is not the case, you are violating Belgian tax legislation and risking a penalty. But above all: you risk a tax or even criminal investigation if this information shows that you are attempting to conceal taxable assets from the view of the Belgian tax authorities in this way.
To date, the tax authorities do not usually play the game so hard, and they initially send an ‘amicable letter’ informing you that “it has been learned that you have a foreign account or life insurance product” and explaining what you must subsequently do to be CRS compliant.
In other words: when you have received such a CRS letter, the tax authorities actually already know that you are not compliant, but they are giving you one last chance to proceed with a spontaneous regularisation.
What should you do now?
Do you only have a foreign account because you regularly stay abroad, but you do not hold any significant assets in it? Then there is no reason to panic: in that case, it is sufficient that you dutifully declare on your tax return from now on that you have such an account.
However, if you have a foreign account or financial products because you hold (a part of) your assets abroad, then you had better check whether you are fully compliant according to the Belgian tax authorities.
Specifically, you need to check 2 things:
(1) what is the origin of your assets?
Even if you have ‘old’ assets (for example, older than the tax limitation period which is often 7 years), you must ask yourself today what the origin of your assets is. Specifically, you need to check whether taxes were due on the generation of your assets at the time, and whether these were also paid. If the assets have not been subjected to the correct tax regime, tax regularisation is still required. The regulations regarding money laundering mean that incorrectly taxed assets that are concealed from the view of the tax authorities become virtually imprescriptible.
(2) was the income from your assets declared correctly?
In addition, you must also check whether any return on your assets, often in the form of interest or dividends, was declared correctly. Here too, tax regularisation is required if this turns out not to have been the case.
In 2020, you can undergo tax regularisation at the following rates:
- 40% on tax-time-barred capital
- tax increase of 25% on tax-non-time-barred income
If you wish to make a concrete simulation of your personal situation, you can do this via the tool we developed “calculate your regularisation“.
If you would like advice on your specific situation, make an appointment with our specialists.
In any case, forewarned is forearmed. Do not ignore the soft CRS invitation from the tax authorities to put yourself in order, because it could very well turn into an aggressive tiger.