One of the measures of the Law of 25 December 2017 on the corporate tax reform regards the interest for late payment and moratorium interest, resulting in some remarkable and potentially even unconstitutional amendments affecting all taxpayers.
The aim of the legislator is to align the rate of the interest for late payment and the moratorium interest to the market interest rate and to provide for the possibility to adjust them annually. After all, the former percentage of 7% no longer corresponded to the economic reality and the market interest rate.
The percentage of the interest for late payment will be linked to the 10-year linear bonds (OLO) rate from July to September of the previous year. There is a minimum of 4% and the maximum is 10% (art. 414 ITC 92). As of 1 January 2018, the minimum percentage of 4% applies.
For tax debts that have already generated late payment interest on 31 December 2017, at least two interest rates will apply. The interest rate of 7 percent per year (as of 1.09. 1996 until 31 December 2017) and the interest rate of 4 percent (as of 1 January 2018).
An (un)equal interest rate
It is highly remarkable that the legislator decided to no longer treat the moratorium interest, due by the tax administration upon repayment of undue tax, as the mirror image of the interest for late payment.
As of 1 January 2018, the percentage of the moratorium interest will always be 2 percentage points less than that of the interest for late payment. Therefore, as of 1 January 2018, the moratorium interest is at 2%.
The question is whether the difference in interest rate between interest for late payment and moratorium interest does not violate the constitutional principle of equality. A request for annulment has been filed before the Belgian Constitutional Court.
A notice of default for moratorium interest
Another significant change with regard to the moratorium interest is that it is no longer automatically due by the State. Indeed, only when a notice of default has been sent by the taxpayer, the taxpayer will be entitled to moratorium interest.
The interest will only commence on the first day of the month following the notice of default. The notice of default can be a default letter to the tax administration, but it can also be included in an administrative appeal (art. 366 ITC 92) or a writ of summons.
Furthermore, the moratorium interest does not begin when, and for as long as, the tax administration is unable to make the reimbursement due to a lack of information regarding the identity or bank data of the beneficiary.
It is clear that the recent legislative changes include more than merely aligning the interest rate for interest for late payment and moratorium interest in tax matters to the market interest rate. There are indeed procedural considerations for the taxpayer, in order to safeguard his entitlement to moratorium interest.