The Court of Cassation confirms: no retroactive application of the general anti-abuse provision
In the past, the tax authorities have attempted several times to invoke the general anti-abuse provision for constructions of which the alleged legal acts already took place before its entry into force in 2012. This approach was criticized in the legal doctrine and jurisprudence. The Courts of Appeal in Ghent and Antwerp have already repeatedly ruled in favor of the taxpayer in this regard. Afterwards, the tax authorities persisted and went to the Court of Cassation, where the Court has definitively settled this dispute.
1 Retroactive application of the general anti-abuse provision
In 2012, a new general anti-abuse provision in the field of direct taxation was implemented. This provision is applicable in corporate income tax of the assessment year 2012 for companies whose taxable period is equal to the assessment year, i.e. companies with a fractured financial year. For companies that close their balance sheet at 31 December and natural persons who are taxed in the personal income tax, the 2013 tax year concerns all legal transactions. The general anti-abuse provision applies when the tax authorities demonstrate that there has been tax abuse by the taxable person through a legal act or a set of legal acts.
From the outset, disputes arose as to whether constructions, of which part of the entirety of legal acts already took place before assessment year 2013, or assessment year 2012, could be brought under the application of the provision. In other words, the question was whether the tax authorities could invoke the anti-abuse provision on a set of acts prompted by tax abuse, if for example only the most recent legal act took place in assessment year 2012 for companies with a fractured financial year and in assessment year 2013 for companies that closed (their balance sheet) at 31 December and natural persons.
The tax authorities were of the opinion that if only the last legal act, of a set of legal acts, took place in assessment year 2013, or assessment year 2012, it could apply this anti-abuse provision to its entire construction. After all, the Minister of Finance, at that time, replied during the parliamentary debates that it suffices that the last legal act, of a set of legal acts carrying out the same transaction, was made after the entry into force of the legislative provision in order to apply the anti-abuse provision.
Eventually, the Courts of Appeal in Ghent and Antwerp had to rule on this issue on several occasions. The Courts stated that the opinion of the tax authorities, according to which the general anti-abuse provision could be applied to a set of legal acts, in which certain legal acts are outside the temporal scope, is not supported by the law. Therefore, considerations made during the parliamentary debate cannot affect the explicit text of the law (the so-called “principle of legality”)
It follows from the relevant legal provision that the legislator’s requirement that all legal acts jointly effecting the same transaction must fall within this temporal scope of application of the anti-abuse provision. This means that all legal acts from the construction must be made from assessment year 2013 for taxpayers which are taxable in personal or corporate income tax when the balance sheet closes on December 31 and for companies with a fractured financial year, respectively from assessment year 2012, regardless of the legal acts or intentions which preceded them
2 Conclusion
Very recently, the Court of Cassation also stated a judgement on this issue, in which it ruled against the tax authorities. Consequently, it thus confirms the view from the legal doctrine and the earlier jurisprudence of the lower courts. It can thus be concluded from the foregoing that the general anti-abuse provision cannot be invoked with retroactive effect. Only the legal act or the entirety of legal acts that was effected from assessment year 2013, respectively assessment year 2012, is targeted by the new anti-abuse provision.
