Belgian court case clarifies burden of proof for copyright income
The Court of First Instance of Walloon Brabant, in its ruling of 29 April 2022, ruled that an employee’s salary be reclassified from copyright income to manager’s remuneration by the tax administration.
Here, the court ruled on the question of who bears the burden of proof in the event of a disagreement over the qualification of income.
The Belgian State considered that the income received by the taxpayer in the 2016, 2017 and 2018 tax years should be qualified as professional income within the meaning of Article 32 of the income tax code (ITC 92). Since, according to the State, the conditions of Article 17, §1, 5° of the income tax code were not met in this case, the income had to be reclassified into professional income. The Belgian State was of the opinion that the tax regime under article 17, §1, 5° of the income tax code is an exceptional regime, so the burden of proof is on the taxpayer.
Consequently, it is up to the taxpayer to prove that the income was generated from a work protected by copyright.
The Court ruled otherwise. The general principle is that the Belgian State bears the burden of proof. It is up to the tax administration, in its capacity as creditor, to prove the elements that give rise to the disputed tax assessment. The administration must establish the elements that give rise to its right to the disputed tax, which implies that it bears the burden of proving these elements.
Article 339, first paragraph ITC 92, states: the declaration is examined and the assessment is established by the administration in charge of establishing the income tax. It shall take as the basis of taxation the declared income and other data, unless it finds them to be incorrect.
The principle is simple: if the administration intends to deviate from a regularly filed tax return, it must provide proof of the tax base to be used.
There are three exceptions to this principle. First, if the reversal of the burden of proof is provided for in a procedural rule. Second, the reversal of the burden of proof occurs when the taxpayer claims an exemption or reduced rate. Finally, the reversal occurs with respect to deductions claimed by the taxpayer.
The court ruled that the regulation of Articles 17, §1, 5° and 37 ITC 92 does not constitute an exceptional regime. Income from copyright transfer qualifies as movable income, which is one of the four categories of income regulated by the Code. This is not a derogatory provision or a provision establishing an exception regime.
Thus, if the State wishes to tax an income declared as movable income by a taxpayer pursuant to article 17, §1, 5° ITC 92 as manager’s remuneration, it must prove that the transaction generating this income is different from the transfer of a copyright.
The Belgian State considered that the income received by the taxpayer in the 2016, 2017 and 2018 tax years should be qualified as professional income within the meaning of Article 32 of the income tax code (ITC 92). Since, according to the State, the conditions of Article 17, §1, 5° of the income tax code were not met in this case, the income had to be reclassified into professional income. The Belgian State was of the opinion that the tax regime under article 17, §1, 5° of the income tax code is an exceptional regime, so the burden of proof is on the taxpayer.
Consequently, it is up to the taxpayer to prove that the income was generated from a work protected by copyright.
The Court ruled otherwise. The general principle is that the Belgian State bears the burden of proof. It is up to the tax administration, in its capacity as creditor, to prove the elements that give rise to the disputed tax assessment. The administration must establish the elements that give rise to its right to the disputed tax, which implies that it bears the burden of proving these elements.
Article 339, first paragraph ITC 92, states: the declaration is examined and the assessment is established by the administration in charge of establishing the income tax. It shall take as the basis of taxation the declared income and other data, unless it finds them to be incorrect.
The principle is simple: if the administration intends to deviate from a regularly filed tax return, it must provide proof of the tax base to be used.
There are three exceptions to this principle. First, if the reversal of the burden of proof is provided for in a procedural rule. Second, the reversal of the burden of proof occurs when the taxpayer claims an exemption or reduced rate. Finally, the reversal occurs with respect to deductions claimed by the taxpayer.
The court ruled that the regulation of Articles 17, §1, 5° and 37 ITC 92 does not constitute an exceptional regime. Income from copyright transfer qualifies as movable income, which is one of the four categories of income regulated by the Code. This is not a derogatory provision or a provision establishing an exception regime.
Thus, if the State wishes to tax an income declared as movable income by a taxpayer pursuant to article 17, §1, 5° ITC 92 as manager’s remuneration, it must prove that the transaction generating this income is different from the transfer of a copyright.
