Introduction of an anti- abuse measure into VAT law.
The Belgian Parliament approved on 27 December 2005 a program Bill containing various rules and regulations concerning VAT issues. One of the most remarkable tax measures which affect the VAT regulation is the introduction of a general anti-abuse rule in article 59 §3 of the Belgian VAT code.
This article allows the Belgian VAT authorities to recharacterize an action if the purpose of the transaction was to avoid VAT. The possibility remains off course for the taxpayer to prove the opposite, in other words that the performed transaction meets legitimate financial or economic needs.
This article 59 §3, that will apply retroactively as from 1 November 2005, is similar to the in 1993 adopted article 344§1 WIB, which applies in connection with direct taxes and which has caused a tremendous legal uncertainty in the past.
However, on 4 November 2005 the Belgian Supreme Court finally decreased this uncertainty by restricting the scope of this anti- abuse measure. The Court stated that, if the administration requalifies a certain transaction, the content and the consequences of this requalification need to remain identical to the content and the consequences aimed by the contracting parties. In other words, the administration is no longer qualified to alter the juridical consequences of a transaction.
This case is brought before the Belgian Supreme Court on appeal against a judgment of the Court of appeal of Luik of 10 September 2004. This judgment concerned the requalification of a purchase of own shares into a distribution of dividends. The Supreme Court decided that the judicial consequences of a purchase of own shares, are not equal to the consequences of a distribution of dividends in the concerned situation.
Since the interpretation of the anti abuse measure in the VAT code will run parallel with the interpretation given to article 344§ 1 of the Direct Tax Code, the Belgian Supreme Court has constrained the legal uncertainty caused by the anti- abuse measure right on time, before also VAT law was confronted with this vagueness.
