Penalties for incorrect declaration of withholding tax exemptions

Employers will now be subject to heavier financial penalties in the event of an incorrect withholding tax declaration that has led to a wrongful exemption from withholding tax.

Context

Employers may, under special circumstances, be exempted from paying withholding tax.

When this is the case, the declaration method in order to obtain the exemption is as follows:

• the taxpayer first submits a declaration in which he indicates the taxable income and the withholding tax normally due and withheld,
• and then submits a second declaration which concerns only the remunerations of employees for whom part or all of the withholding tax due does not have to be paid to the Treasury. On the second declaration (274.XX), the taxable income is indicated, as well as a negative amount of withholding tax due. Each exemption has its own declaration code (for example: shift work 274.74).

After a check, it may turn out that the elements mentioned in particular in the second declaration are incorrect. The employer could then have wrongly considered that the withholding tax did not have to be paid to the Treasury. The reasons for an incorrect declaration can be various, for example the employer does not meet the definition of a company where shift work is carried out, the employer does not meet the definition of a start-up company or the employment percentage of a master/bachelor is lower than the % taken into account for the calculation of the exemption,...

Until 31 March 2022

When the administration was confronted with such a problem, increases could be applied in three situations: in case of absence of declaration, late submission of declaration or in case of incomplete or incorrect declaration. These increases were applicable to taxes due on non-declared or late-declared income.

In the examples above, when the employer submits the second withholding tax declaration with a wrong withholding tax exemption amount, the employer is submitting an incorrect declaration. In the case of the incorrect second withholding tax declaration, there is, in principle, no non-declared or late-declared income and it was therefore impossible, in practice, to effectively apply increases.

Since 1 April 2022

In order to solve the situation, the legislator inserted a modification to allow employers to be financially sanctioned in case of incorrect declaration of the withholding tax which has led to a wrongful exemption from paying withholding tax.

From now on, the basis for calculating the increase will be the amount of the incorrectly declared withholding tax exemption (i.e the increase will be calculated on the amount of the withholding tax exemption that has been wrongly claimed).

Depending on the nature and seriousness of the violation, a percentage ranging from 10% to 200% should be applied to this base.

Table of penalties in case of incorrect declaration having led to an exemption

In the absence of bad faith, the minimum 10% increase may be waived. In particular, there is no bad faith when the employer spontaneously (i.e. before any verbal or written steps or prior investigation by the tax authorities) regularizes his situation within the time limit, in principle by means of a declaration correcting the declaration mentioning the amount of the exemption from payment of the withholding tax due.

Entry into force

The new penalties came into effect on 1 April 2022 and therefore apply to violations committed on or after that date.

Sources: Laws of 28 March 2022 (Belgian Official Gazette 31.03.2022) and 20 November 2022 (Belgian Official Gazette 30.11.2022) on income tax procedure, Royal Decree of 13 September 2022 amending articles 225, 228, 229 and inserting an article 228/1 in RD/CIR 92 (Belgian Official Gazette 13.10.2022), Circular 2022/C/116 of 16 December 2022 concerning certain amended articles on income tax procedure.