Belgian tax authorities target large construction projects
Working with foreign subcontractors
It is no public secret that Belgian contractors frequently (have to) use foreign subcontractors because they themselves do not have sufficient staff to carry out the construction projects alone. As a result, construction professions have been on the list of bottleneck professions in Belgium for many years, so the search for other solutions quickly leads to other countries.
Thanks to the European Union, outsourcing works to construction companies in other member states is not the administrative nightmare it once was.
Belgian tax liability?
All too often, the rules of the game regarding international employment are still insufficiently known. In terms of international taxation, a foreign contractor may in some cases create a Belgian permanent establishment resulting in Belgian tax liability. The determination of the duration of projects is particularly important. A possibly tax-inspired division of projects/contracts between group companies can also create a permanent establishment!
Due to the large presence of foreign subcontractors in the construction sector, this sector is particularly sensitive to this issue. Even to the extent that a separate arrangement has been developed for construction and installation activities in most double taxation treaties. It is therefore not illogical that the Belgian tax authorities are also keeping a close eye on this.
It goes without saying that a discussion with the Belgian tax authorities is best avoided. A proactive approach in this matter is therefore highly recommended.
Recent experience has taught us that the tax authorities draw particular attention to very large construction projects, such as the building of bridges, roads and other infrastructure works. For these kinds of projects, Belgian contractors frequently use subcontractors from other EU countries. The size of these projects and their national impact makes it so that they cannot escape the attention of the tax authorities. Coupled with an extensive data strategy, it is quite easy for the tax authorities to identify foreign companies working in Belgium on such projects. This has potentially serious consequences, both for the Belgian contractor and for his foreign subcontractors.
The data are available through various channels, such as:
- Limosa/Dimona notifications
- A1 document
- declaration of work and attendance registration ‘checkin@work’.
- VAT returns
- CBE database
Moreover, with these data the Belgian authorities have numerous possibilities to check the correct compliance with other legal regulations, including: illegal employment (DIMONA, LIMOSA, residence permits, single permit, etc.), false self-employment, false or irregular posting, prohibited provision of staff, etc.
Please do not hesitate to contact us. We will be happy to analyze your specific situation regarding possible Belgian tax liability and the correct compliance of all social and sectoral rules and will guide you in order to avoid unpleasant consequences!