The General Administration of the Special Tax Inspectorate – also known as the “STI” (“BBI”/ “ISI”) – is probably the best known and most feared tax administration within the Federal Public Services for Finance (“FPS Finance”). As we have already seen in the past, the STI does not hesitate to test or even push the limits of its powers and competences during certain tax audits. However, these limits do exist, and it is important to remind the STI of them if necessary.
For taxpayers, this means that they must be aware of their rights and obligations during audits conducted by the STI. This can help to prevent unlawful acts of investigation from being conducted. It can also help to ensure that the necessary measures are taken, and the appropriate reservations made, to safeguard the taxpayers’ rights in future proceedings.
In a nutshell, three limitations to the STI’s scope action can be identified:
- Material limit: Although the STI is a so-called “polyvalent” administration, which means that it can control and establish all the taxes that fall within the competence of the FPS Finance, the fact remains that the STI’s legal mission is to combat fraud. In our opinion, it is therefore not up to the STI to issue a tax assessment in a file where it realises, after having carried out the necessary verifications, that the matter is not fraudulent. In this case, it must transfer the file to the competent tax administration.
- Territorial limit: The STI consists of five regional directorates, each of which has its own territorial competence, which must therefore be checked when it carries out an act of investigation or taxation (especially when the audits are carried out in the Brussels-Capital Region).
- Procedural and temporal limits: The various tax codes provide for procedural rules and substantial formalities to be respected by the tax administration, including the STI, when it intends to investigate or rectify the taxpayer’s tax situation. In addition, these codes also impose time limits for both the investigation phase and the tax assessment or recovery.
It is precisely this third category of limitations that has just been emphasised by the Antwerp Court of Appeal in a judgment dated 21 June 2022 in the context of a corporate tax assessment for the tax year 2013. In this case (in which Eubelius’ team led by Svjatoslav Gnedasj assisted the taxpayer), the STI had sent a request for information to a third party in 2016 without specifying which tax it was investigating. This request was for the years 2012 and earlier. It then taxed the taxpayer in corporate income tax for the tax year 2013, and a VAT adjustment also followed.
However, if such a request for information is made in corporate tax matters beyond the ordinary three-year investigation period, the law stipulates that it must be preceded by a notification of indications of fraud to the taxpayer under investigation. On the contrary, where VAT is concerned, this notification must only take place before the administration rectifies the taxpayer’s situation – which was the case here – but not necessarily before it begins to carry out investigative acts.
At the hearing before the court of first instance, the STI acknowledged that, when the aforementioned request for information was sent, its investigation covered both corporate income tax and VAT. Nevertheless, it argued that, given its polyvalent competence, there was nothing to prevent it from choosing the “least burdensome” procedural rule, in this case the VAT rule, which did not require it to send prior notification of indications of fraud before proceeding with investigative acts.
The Antwerp Court of Appeal did not follow this reasoning and emphasised that when the STI conducts a simultaneous investigation on corporate income tax and VAT matters, its polyvalent competence does not exempt it from complying with the legislation applicable to each type of tax it investigates. Therefore, in corporate tax matters, the STI was required to send a prior notification of indications of fraud to the taxpayer. Since it did not do so, the assessment was null and void. A ruling that deserves full approval!
