An act dated 12 March 2023 amended some aspects of the VAT procedure. One of the remarkable changes is the amendment of article 62 of the VAT Code, which allows the VAT administration to request information from the taxpayer and third parties. That procedure is now aligned with one of the two existing procedures regarding income taxes. If no delays occur in the technological implementation of (other parts of) the new act, the new article 62 of the VAT Code will enter into force on 1 January 2024.
State of play: current legislation on requests for information regarding VAT and income taxes
Currently, the VAT Code provides that “any person shall be obliged, at the request of the officials of the administration in charge of value-added tax, to provide, orally or in writing, any information requested from him in order to verify the correct assessment of the tax on his behalf or on behalf of third parties.” This duty to reply, for which no clear statutory response period is specified, applies to both the taxpayer and third parties, and to both oral and written questions.
The Income Tax Code (“ITC92”), however, provides separate regimes for questions to taxpayers and questions to third parties respectively.
For taxpayers, ITC92 firstly contains an obligation to respond to written requests for information. In principle, the taxpayer must reply within one month, counting from the third working day following the sending of the request for information. The tax authorities can extend this response period for legitimate reasons. Secondly, the administration also has an oral questioning right. However, it can be inferred from the wording of the law that the taxpayer is not obliged to answer oral questions. Therefore, the tax administration cannot impose an administrative fine or any other sanction (such as an ex officio assessment with reversal of the burden of proof) for failure to answer oral questions.
Third parties, however, are in principle obliged to reply to both written and oral questions. Consequently, administrative fines can be imposed on them. Again, no clear statutory response period is specified.
New statutory response period for written requests for information for VAT purposes
With the implemented amendment of article 62 VAT Code, which is part of the gradual (but very slow) harmonisation of procedural provisions on direct and indirect taxes, the VAT procedure for requests for information (to taxpayers as well as to third parties) is now aligned with the existing procedure for requests for information to taxpayers in relation to income taxes. A first consequence is that the statutory one-month response period for written requests for information (which can be extended for legitimate reasons) is now also being introduced in the VAT Code. The (frequent) cases of being confronted with excessively short response deadlines, which the VAT officials could impose at their own discretion, will thus finally become a thing of the past. The legislator thus meets the need for legal certainty in VAT procedures.
However, the VAT Code will deviate from the procedure set out in ITC92 in one respect, by providing for a shortened response period in two specific cases: when the rights of the Treasury are at risk or when the request for information relates to the verification of a VAT refund request, the response period will be limited to 10 days (but again, the tax authorities may grant an extension). In the latter case, if a taxpayer fails to provide an answer within the stipulated shorter period, the VAT administration will also be able to withhold the requested VAT credit (as established in the VAT return) (new article 76, §1 VAT Code).
Oral requests for information on VAT: no more administrative fines... but possibly another sanction?
In addition, because of the amendment to the VAT Code, the right for the VAT administration to ask oral questions will exist, but the obligation for “anyone” to answer them will no longer exist. Consequently, the VAT administration will no longer be able to impose administrative fines if an oral question is not answered. Unlike in the procedure for income taxes, this will be the case for “anyone”, hence for both the taxpayer and for third parties.
Based on the new legal provision, taxpayers and third parties can therefore refuse to respond to an oral request for information on VAT without fearing any (administrative) penalty. However, there is a caveat regarding a risk of an ex officio assessment (with reversal of the burden of proof). Indeed, in that respect there seems to be a difference between the two procedures. Regarding income taxes, an ex officio assessment is possible, inter alia where the taxpayer fails to provide the requested information within the statutory response period (article 351 ITC92). As ITC92 does not stipulate a response period for oral requests for information to taxpayers, the ex officio assessment procedure in relation to income taxes cannot be initiated when an oral request for information remains unanswered. However, the VAT Code allows the tax administration to impose an ex officio assessment when the taxpayer has not replied to “the request for information referred to in article 62” (article 66 VAT Code). Since the new article 62 VAT Code explicitly refers to the possibility of requesting information orally, the imposition of an ex officio tax assessment (which is rather rare in VAT matters) if the taxpayer does not reply to the oral request for information cannot be automatically excluded. However, the law stipulates no response period for answering oral requests for information. Such a far-reaching interpretation could therefore disproportionately prejudice the taxpayer’s right of defence and the principle of legal certainty. The preparatory works for the reform also give no indication that the legislator had such an interpretation in mind.
Know your rights
The impact of these prima facie limited changes to the VAT procedural rules demonstrates once again the importance for every taxpayer (and third party) of having a thorough knowledge of their procedural rights and obligations. After all, an unnecessary or hasty response to a request for information at the beginning of a tax procedure – e.g. out of fear of a (non-existent) penalty – can have a huge impact on the further course of the procedure. We will be happy to assist you if you are faced with such questions (whether or not during a tax dawn raid)