Belgium Latest To Block Pandemic Relief To Tax Haven Cos.

By Matt Thompson
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Law360 (May 7, 2020, 3:32 PM EDT) -- Belgium is the fourth European Union country to block pandemic relief measures to companies with a presence in tax havens, as it adopted an amendment to an emergency finance bill.

The amendment, proposed by Belgian Finance Minister Alexander De Croo, was adopted Wednesday and stipulates that any company with links to a tax haven via a shareholder or subsidiary won't be eligible for government aid.

An exception will be made for companies with a genuine presence in "fiscally attractive countries" as long as they can demonstrate good faith, according to De Croo. The minister declined to comment further. 

France, Poland and Denmark previously adopted similar measures applying to economic relief aimed at mitigating the impact of the global COVID-19 outbreak.

Belgian law requires companies to report to the country's tax authorities any payment in excess of €100,000 ($108,000) to a jurisdiction with a tax rate at or below 10%. The country's list of tax havens consists of Andorra, Anguilla, Bahamas, Bahrain, Bermuda, the British Virgin Islands, Cayman Islands, Guernsey, Isle of Man, Jersey, Jethou, Maldives, the Micronesian Federation, Moldova, Monaco, Montenegro, Nauru, Palau, St.-Bartholomew, the Turks and Caicos Islands, the United Arab Emirates, Vanuatu, and Wallis and Futuna.

The Belgian relief measures allow companies to postpone the payment of certain taxes until the economy has recovered, and it offers the companies the option to pay in installments. In Belgium, companies pay taxes in advance at the beginning of each quarter, a requirement that has been suspended.

Christian Leysen, a co-signatory of the bill and a member of center-right Open VLD, which includes De Croo as a member, told Law360 that while he would prefer action at the European level to address the issue of tax evasion, the Belgian measure was appropriate. He also said the amendment was aimed at the worst offenders.

"People like to see companies are paying their taxes, but it is correct that this is limited only to companies that make substantial payments to tax havens," Leysen said.

Leysen said many companies would prefer to simply pay the tax they owe rather than apply for a postponement of the required quarterly payments, which would just mean some of their capital sits in a bank account at a negative interest rate.

Despite having the highest tax on workers in Europe, Belgium is often accused of being a tax haven. Last year, a report by the European Parliament found the country has shortcomings in its tax system that are used to facilitate aggressive tax avoidance.

"A lot of money is circulating in [Belgium] through companies that employ practically no one, which shows that it is being used by multinationals that do aggressive fiscal planning," Kathleen Van Brempt, a Socialist member of the European Parliament, said at the time.

The Belgian Finance Ministry was unavailable for comment. 

--Editing by Neil Cohen

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