Mazars Info June 2023

GLOBAL MOBILITY SERVICES

Telework in Europe: New official Framework Agreement: Signing of the Framework Agreement

As mentioned in our previous newsletter, European Member States have now officially issued the Framework Agreement on the application of Article 16 (1) of Regulation (EC) No. 883/2004 in cases of habitual cross-border telework. The purpose of this agreement is to bring an appropriate response to the increase in telework in Europe following the Covid-19 pandemic.

This Framework Agreement shall enter into force on 1 July 2023 as long as at least two States have signed it.

As a reminder, please note that until 30 June 2023, we are still in a period of tolerance during which the physical presence of a person is not considered to determine the competent state to levy the social security contributions. The purpose of this Framework Agreement is that it enables an employee who carries out habitual cross-border telework in Europe to remain subject to the legislation of the State in which its employer has its registered office or place of business, although this person teleworks in its State of residence for less than 50% of its total working time.

Reading in detail the new Framework Agreement, it mentioned amongst others that:

• It is not applicable to self-employed persons;
• It does not cover activity other than telework pursued in the State of residence of the employee and real activity in the State where the employer has his registered office;
• The cross-border telework must be agreed between employer and employee formally or informally. The request for the application of the Framework Agreement (which will be based on art 16. of Regulation (EC) No. 883/2004 agreement) must be made in consent between both parties.
• Such agreement made between the State of residence of the employee and the State in which the employer has his registered office will be valid for 3 years (with extensions possible upon request) and the duration will be specified in an A1 certificate.

Based on the above, we remind you that as from July 2023, outside the scope of this Framework Agreement on cross border telework, the general rule to determine the competent social security State will apply again.

According to the EU Regulation on social security Nr. 883/2004, an employee is subject to the social security system of the State in which his employer is located.

In case of activities in two or more Member States (simultaneous employment), the employee is subject to the social security system of the State of residence provided the employee works more than 25% in the State of residence. If this is not the case, a decision tree has to be verified to determine the applicable social security regime.

As a recent development, the UK authorities (HRMC) confirmed that UK will NOT, for now, be opting into the new Social Security Framework Agreement for new teleworkers. So, for now the general rules as stated in the EU withdrawal agreement are applicable in employment situations involving the UK.

Furthermore, you can find hereafter an overview of the countries which have already signed the Framework Agreement (overview based on the situation per June 9, 2023):

In case you have employees teleworking abroad or you are a foreign employer with staff teleworking in another EU member state, please reach out Stijn Sablon (stijn.sablon@mazars.be) or Bart Van Laere (bart.vanlaere@mazars.be).

CORPORATE INCOME TAX

Important notice on Belgian TP filings

The mandatory Transfer Pricing documentation requirements (listed below) have been installed by the Belgian legislator and apply as from FY16.

• Country-by-country report (form 275CBC)
• Country-by-country report notification (form 275CBC-NOT)
• Master file form (form 275MF)
• Local file form (form 275LF)

The Belgian TA is now increasingly scrutinizing whether qualifying Belgian (non)-resident companies comply with these Belgian TP documentation reporting obligations. Letters are currently being sent to eligible taxpayers which aren’t fully compliant.

A first infraction in good faith will not trigger an administrative penalty, any subsequent late / incomplete or incorrect filing however will.

• 1st infraction: zero
• 2nd infraction: € 1.250
• 3rd infraction: € 6.250
• 4th infraction (onwards): € 25.000

It should be noted that the Local File form is an integral part of the Belgian CIT return, implying non-compliance constitutes an incorrect CITR filing that could trigger administrative penalties and other measures such as ex officio assessments, tax increases and extended assessment terms.

It is key to follow-up on future TP filings to avoid penalties and any other administrative measures. 

The following deadlines, which are dependent on the year-end, should be monitored:

• Form 275CBC (year-end 31 Dec 2022) – due 31 Dec 2023
• Form 275CBC-NOT (year-end 31 Dec 2023) – due 31 Dec 2023
• Form 275MF (year-end 31 Dec 2022) – due 31 Dec 2023
• Form 275LF (year-end 31 Dec 2022) – due 9 Oct 2023 i.e. statutory CITR filing due date

Our CTX specialists can provide further assistance on the preparation, review and or E-filing via MyMinfin of these Belgian TP Filings.

VAT

ECJ 25 May 2023, C 114/22, Dyrektor Izby Administracji Skarbowej w Warszawie – Request for preliminary ruling

Economic reality takes precedence when it comes to VAT. A national decision that makes a right to deduction dependent on formal requirements, without taking into account the economic reality of a transaction goes too far.

On 27 October 2015, a company M. issued an invoice to company W for transfer of trademarks.
Such transaction was subject to VAT, which was declared and paid by company W. Company W has deducted the VAT encumbering the purchase price.

By decision of 20 October 2017, the Polish tax authority called into question the right to deduct the VAT from which W. had benefited in respect of that invoice. Based on a provision of the Polish civil law, the tax administration concludes that this transfer of trademarks was a fictitious transaction and consequently deprives company W of the right to deduct VAT on the acquisition of the trademarks.

The Regional Administrative Court of Warsaw annulled this decision, and the tax authorities filed an appeal before the Supreme Administrative Court of Poland.

The court had doubts as to whether Articles 167 and 168 of Directive 2006/112 may be interpreted as precluding a national provision which deprives a taxable person of the right to deduct VAT on the acquisition of an asset deemed to have been fictitious within the meaning of the provisions of national civil law, without it being necessary to establish that the transaction is the result of VAT evasion or abuse of rights.

The Supreme Administrative Court of Poland has decided to refer the question to the European Court of Justice (ECJ) for a preliminary ruling.

According to the ECJ, as a substantive requirement, the right of deduction is, in principle, subject to the proof that the transaction has actually been carried out, that is to say the actual performance of the delivery of goods or of the provision of service. Only if that performance was not carried out, if it was fictitious, can the right of deduction be denied. The fictitious character of the transaction is not to analyze through the prism of civil law, but through the prism of economic activity.

Additionally, the right of deduction may also be denied if it is established, in the light of objective evidence, that that right is being relied on for fraudulent or abusive ends. A transaction cannot be presumed abusive or fraudulent on the ground that such transaction is considered as fictitious from a national civil law perspective.

Consequently, the Court ruled that Articles 167 and 168 of Directive 2006/112 preclude a national legislation under which a taxable person is deprived of the right to deduct input value added tax solely because a taxable economic transaction is regarded as fictitious under national civil law. The Polish tax authorities cannot deny the right of deduction because the
transaction has been considered as fictitious under national Civil law.

Our VAT specialists can provide assistance to mitigate your risk.

VAT

LAST CALL - Notification VAT deduction – actual use: Before June 30, 2023

As of January 1, 2023, the application procedure for an authorization to apply the real use method for VAT deduction will be replaced by a prior notification procedure (1°) followed by the submission of supporting information to the tax administration (2°).

For VAT taxpayers already applying the real use method on 31 December 2022, this notification must be made before June 30, 2023. The notification must be made via electronic form E-604 B (rubric “real use”), where taxpayers mention the date as from when they are applying the real use method.

In addition to this notification, the tax administration also requires a given set of information relating to the application of the right to deduct according to the real use method.

For taxpayers which are already applying the deduction system according to the real use method on December 31, 2022, these data must be sent in the periodic VAT return for the month of May 2024 (to be filed by June 20, 2024) at the latest.

Our VAT specialists can provide assistance with such notification.

LEGAL

Screening of Foreign Direct Investments (FDI)

In response to growing concerns about certain foreign investors seeking to gain control or influence over European companies operating in critical and strategic sectors, a European foreign direct investment screening framework has been developed.

On 30 November 2022, following this European framework, the various Belgian governments reached a cooperation agreement on the introduction of a screening mechanism for foreign investments in sensitive sectors of importance for public order and security or strategic interests. This screening mechanism should prevent investors from outside the European Union from acquiring control, ownership or management of critical infrastructure in Belgium.

Interfederal Screening Committee (ISC)

The Belgian cooperation agreement provides for the establishment of the Interfederal Screening Committee (ISC), a body that will be charged with the task of analyzing foreign direct investments and verifying whether they pose potential risks to the country's national security and strategic interests. It can thus identify potential threats and take preventive measures to
protect sensitive national sectors, such as critical infrastructures, critical technology, raw materials, energy, defense, etc.

Targeted investments

The screening mechanism will have to be applied in case of:

• Investments by a natural or legal person with principal residence or registered office outside the EU; and
• Investments by any company, European or otherwise, one of the ultimate beneficiaries of which has its main residence outside the EU.

Specifically, the following investments (direct or indirect) are targeted:

• Acquiring 10% of the voting rights in Belgian entities whose activities are related to the sectors of defense, energy, cyber security, electronic communications or digital infrastructures, and whose annual turnover in the financial year preceding the acquisition exceeded EUR 100 million; or
• Acquiring 25% of voting rights in Belgian entities whose activities touch on vital infrastructures, essential technologies, the supply of critical inputs (energy or raw materials), access to sensitive information, private security and freedom of the media; and
• Acquiring 25% of voting rights in Belgian entities whose activities touch on technologies of strategic importance in the biotechnology sector, and whose annual turnover in the financial year preceding the acquisition exceeded EUR 25 million.

Procedure

After the signature but before the closing of an investment agreement, the investment must be reported to the ISC. At the end of the procedure, which usually should not exceed two to three months, the members of the committee submit their opinion to the minister. The final outcome may be positive, with or without corrective measures, or negative.

LEGAL

Sanctions

A foreign investor may be fined up to a maximum of 10% of the investment in case of failure to provide information or incomplete information, or in case of failure to provide the necessary information on time.

If the reporting obligation has not been respected, if incorrect, distorted or misleading information is provided or if additional measures are not respected, the foreign investor may be fined up to 30% of the relevant investment.

Timing

The screening mechanism will take effect from 1 July 2023, with some special cases that need to be taken into account:

• Under certain conditions, and up to a maximum of five years after the investment, an ex officio procedure can also be initiated for transactions that took place before 1 July 2023;
• Investment agreements that are signed before 1 July 2023, but whose closing takes place after 30 June 2023, should not be notified as the obligation to notify arises when the agreement is signed;
• If an investor already holds 20% in a Belgian entity, and after 1 July 2023 this increases to 30%, the investment must also be notified.

Law inserting a Book XIX 'Consumer debts' into the Code of Economic Law

On 23 May 2023, the Law of 4 May 2023 on the insertion of a Book XIX called "Debts to Consumers" into the Code of Economic Law was published in the Belgian Official Gazette.

The provisions of this book aim to provide a high level of protection for consumers when they find themselves in a situation of late payment. In doing so, the intention is not to limit or prohibit the right of the company to fair compensation, but to better frame the amicable recovery of debts and to prohibit abusive practices and thus better protect consumers.

The law provides for a strict framing of compensation clauses, the obligation to send a free first reminder and the obligation to wait 14 days before applying any penalties for late payment. Rules for the activity of amicable recovery were also strengthened.

In terms of structure, the book is divided into the following two titles: (i) the payment of consumer debts to businesses in general, with, in the event of late payment, the principle being the first free reminder and the limitation of damages clauses, and (ii) the amicable recovery of debts, incorporating an adapted version of the law of 20 December 2002 on the amicable
recovery of consumer debts.

The law of 4 May 2023 enters into force on 1 September 2023 for future contracts. It applies, from 1 December 2023, to any past due and unpaid debt owed by a consumer to a company arising from a contract entered into before its entry into force when the delay in payment arises after its entry into force.

KEEP IN MIND THE DEADLINE!

VAT

• Notification VAT deduction – actual use: Before June 30, 2023

Corporate income tax

• Tax Forms 281.50 : 29 June 2023