Reader question: Stalemate Belgian taxes and non-residents

This is Kafka at his best. For example, I now have to prove that I have my domicile in Belgium and not in Thailand, as the Dutch tax authorities have decided because somewhere they considered my postal address as a residential address.

I have also filled in this code 1073-91 as all years and as all years never 1081, so far I have not received my assessment letter yet, I will inform you if I receive it this year, they have time until December 31, 2019, normally this comes around May or June. Box 13 code 1057-10 and 2057-77 there is a statement that they have not obtained any income, why now suddenly a statement from the Regional revenue office, or tax office in Bangkok. There is a problem .

I thought that when you were deregistered in Belgium, you no longer had to pay taxes there?

First of all: I have clients in the US and Curaçao as far as Thailand, the Philippines and Japan and in many countries in between, but the Belgian tax system is the worst you can encounter as a tax specialist!

I do not think the conduct of the Belgian assessment official is correct. Your friend has filed a report and ticked code 6-1073 in section A, 91. I suspect that is also correct. The case officer doubts the correctness of this and personally changes it to code 1081-83. And I don't think that's right. If in doubt on his or her part, your friend should have been given the opportunity to demonstrate the correctness of the code he chose (1073-91). But will this ultimately make much of a difference? A big chance not!

The Belgian tax system has three categories for non-residents. You belong to:
1. the 1st category if the following two conditions are met:
– you have received taxable professional income that amounts to at least 75% of all your professional income obtained in that tax year from Belgian and foreign
origin (75% rule of world income), and
– you were a tax resident of a 'Member State of the European Economic Area other than Belgium' during the entire tax year.

Depending on the situation, you tick the codes 6-1093, 71-1094 or 70-1095 in section A, 69.

2. the 2nd category if you only meet the condition referred to in the first indent of point 1 above, i.e. if you:
– meets the 75% rule, but
– was not a resident of a 'Member State of the European Economic Area, other than Belgium'.

In that case you have to tick code 1073-91.

3. the 3rd category if you do not meet the 75% rule, as referred to in point 1 above. In that case you cannot belong to either the 1st category or the 2nd category. You may therefore not tick any code from section A, 6.

In that case, if you are not a resident of France, the Netherlands or Luxembourg, you must tick the code 1081-83 of section A, 8. You then fall under a less favorable tax system (fewer deductions).

And the latter has now happened with regard to your friend due to a change made too prematurely by the tax officer in charge.
What the tax officer is allowed to do is ask your friend to actually demonstrate the correctness of his statement that 75% of his worldwide income is taxed in Belgium. To this end, this official asks (afterwards) for a Thai statement regarding the income received in Thailand.

A response that it is not that difficult to prove that Thailand is your primary residence is irrelevant. After all, the Belgian tax authorities already assume that because they do not ask for a certificate of tax residency in Thailand (form RO 22).
The same applies to obtaining a tax number based on his bank account and the interest earned and taxed on it. Having a tax number says nothing about any income generated in Thailand. Such a number does not even say anything about being a tax resident of Thailand. This also applies to paying tax on interest income in Thailand.

This only concerns determining his worldwide income and whether it is correct that the 75% requirement is met. Nothing more and nothing less!

And then a problem arises: the Revenue Office refuses to issue a statement RO 21. Reason: your friend does not pay Personal Income Tax (PIT) in Thailand. The fact that he is formally taxable in Thailand (without – possibly – a payment obligation) does not make any difference to them.

In that context, it is difficult for me to place a given reaction of committing (tax) fraud. I assume that far away most of your friend's income is taxed in Belgium. If there is still something left for Thailand to tax, Thailand has a range of deductions or reductions. This applies even more if your friend is already 65 years old. In addition, the PIT has a 0% rate for the first 150.000 THB of taxable income. Most likely this will all lead to a nil attack.
Without bringing "coffee money" for the Thai tax official (which I always advise my clients against because this is punishable even in Thailand), there are no Thai tax officials who want to accept your return, let alone process it and here an attack to be issued. In that case it is "difficult" to speak of fraud!

If your friend lived in the Philippines, he would have it a lot easier:
1. not Belgium but the Philippines would then be entitled to levy tax on his Belgian pension;
2. Subsequently, the Philippines shall not impose income tax on foreign residents on income the source of which is outside the Philippines;
3. Obtaining an income statement from the Philippine Tax Authorities (the BIR) is usually very smooth.

Belgium with Thailand on one side and the Philippines on the other makes a world of difference!

But now that the Revenue Office refuses to cooperate, you cannot put this problem on the plate of the Belgian Tax Authorities. This Service may ask your friend to prove the correctness of his claim, namely that the 75% requirement is met. Your friend may then use all available means to prove that he does not generate income in Thailand.
But don't come up with the claim that you are not allowed to work in Thailand under Thai law without a work permit, which I also read in a response. There are plenty of ways to generate income in Thailand without a work permit.

Now that the case officer has already dug in so deeply by establishing an assessment that deviates from the declaration, I have a hard head that this official will reduce the assessment that has already been imposed without the statement from the competent tax authority of Thailand. .

If your friend still wants to continue with this matter, I would advise him not to leave this further to his accountant, but to hire a tax specialist, specialized in international tax law and preferably with knowledge of the practice in Thailand, in to take the arm. On the basis of practical examples, he may be able to persuade the assessment officer to change his mind. But that is more of a favor than a right!

Incidentally, with regard to the 1st category of taxpayers, the 75% rule applied by Belgium to residents of a 'Member State of the European Economic Area other than Belgium' is contrary to EU law. However, the same also applies to the requirement of even 90% applied by the Netherlands!