Belgium: Retroactive application to 2016 of annual tax on credit institutions struck down
May enable credit institutions to claim a refund for the single annual tax paid for 2016 (Constitutional Court decision)
Retroactive application to 2016 struck down (Constitutional Court decision)
The Constitutional Court on 27 October 2022 (case 136/2022) struck down the retroactive application to 2016 of the single annual tax on credit institutions, which may enable credit institutions to claim a refund for the single annual tax paid for 2016.
Background
The government introduced a new single annual tax on credit institutions in August 2016. The new tax aimed at bringing simplification by replacing:
- The then existing annual bank taxes (i.e., the annual subscription tax and loan-to deposit tax)
- The deduction limitation measures in the corporate income tax (i.e., a limitation on the use of tax losses, notional interest deduction and dividends received deduction)
- The financial stability contribution
The base for the tax is the annual average of the amount of liabilities to customers during the year preceding the assessment year. For the 2016 transitional year, the tax was calculated on the outstanding amount of liabilities to customers on 31 December 2015. As a transitional measure and to avoid double taxation for the 2016 transitional year, the bank levies that were already paid with respect to 2016 could be set-off against the new annual levy.
The tax is due in principle on 1 January each year and became legally due for the first time on 1 January 2016. The tax must be paid no later than 1 July each year. For the 2016 transitional year, the tax was ultimately due on 30 November.
Several credit institutions challenged the retroactive application of the tax based on incompatibility with the Belgian constitution and principle of non-retroactivity of (tax) laws. The courts of first instance handling the cases raised several preliminary questions to the Constitutional Court, which has now decided that although general public interest may require that a tax measure has retroactive effect, in this case neither the parliamentary preparations, nor the explanatory memoranda accompanying the law reasonably explain or justify why a retroactive application would be necessary to achieve the law’s objectives or a general public interest.
Read a November 2022 report prepared by the KPMG member firm in Belgium
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