What does the Ruling Commission’s 2021 annual report tell us?

Prior decision or ruling

The system of advance decisions offers all taxpayers (private individuals and/or companies) the possibility to obtain an advance ruling from the FPS Finance concerning the tax consequences of a transaction or situation which has not yet had fiscal consequences.

With larger transactions for which the tax treatment is not entirely certain, it would be advisable to request a ruling.

Copyrights, specific employer costs and innovation deductions are among the top 3 topics associated with ruling requests.

Ruling decisions that were not successful

A positive ruling does not set a precedent for every taxpayer, but it does provide useful information. Even situations that DVB does not accept are instructive.

This article reviews several dossiers that were not accepted by DVB and focuses on three issues in particular: copyrights, property income and capital gains on crypto currencies.

Copyrights: on psychologists, clothing collections and fashion shows

Revenue from the transfer of copyrights remains a "hot topic’. It is subject to a more favourable tax rate than regular professional income provided certain limits and conditions are met. Find out more in our article entitled ’New declaration duty for any copyright income’.

However, some applicants in the annual report were not successful. The report tells us that DVB considers the organisation of online fashion shows as purely publicity related work. The design of clothing collections by a sole trader for the purpose of private sales is not in any way associated with a transfer of copyrights. Another case involved psychologists having developed a course book and research methodology. But DVB judged that what had been produced did not involve a lot of own creativity introduced by the psychologists, but was mainly based on previous methodologies or theoretical insights.

Qualification of property income as professional income

The annual report comprises two interesting cases in which the applicant wanted to both sell a collection of building plots and rent out several apartments. In both cases DVB ruled that the capital gains from the sale of the plots and the rents received should be taxed as professional income. Find out more in our article entitled 'Tax rules when investing in multiple properties’.

The main reasons were as follows:

• The applicant, a surveyor who was also professionally involved in building plot allocation and housing projects, had a distinct professional affinity with and knowledge of the construction industry. According to DVB, the planned sale of the building plots was closely linked to the applicant's professional activities.

• The construction of a property comprising several apartments intended for rental was financed with substantial loans. Moreover, the applicants were actively involved in the development of construction projects and property operations through various companies. They already rented out several apartments via a similar operation to the one in the application.

Capital gains on crypto currencies exempt?

The annual report describes several cases focusing on whether or not capital gains on crypto currency are taxable. According to several taxpayers, these capital gains are not subject to taxation for the purposes of personal income tax and need not be declared. However, according to DVB, this always relates to taxable miscellaneous income. The main reasons were as follows:

• The applicant invested a significant percentage of their movable assets in crypto currencies.
• The applicant invested more than 50% of their savings in crypto currencies.
• A large number of purchase and sale transactions took place in a short time.
• On average, more than 30% of the individual’s income was invested in crypto currencies each month.
• The applicant received a replacement income due to illness and invested an acquired inheritance in crypto currencies. In addition, there was only a brief period between the purchase and sale of the crypto currencies.

The above criteria could result in capital gains realized on crypto currencies being considered not to be part of ”the normal management of private assets according to the rules of good housekeeping”, but as a taxable miscellaneous or professional income for the purposes of personal income tax. Find out more in our article entitled 'What about Bitcoin taxation’.

We selected just three topics here, but the annual report contains many more on various tax issues. Please do not hesitate to contact us should you have questions concerning taxation. We would be happy to assist.

Download the full 2021 annual report here.