1^er SEPTEMBER 2006. - Law adapting anti-corruption legislation (1)

ALBERT II, King of the Belgians,
To all, present and to come, Hi.
The House of Representatives adopted and sanctioned the following:
PART I^er. - General provisions
Article 1^er. This Act regulates a matter referred to in Article 78 of the Constitution.
Art. 2. This Act provides for the transfer into Belgian law of certain OECD recommendations which are included in the 2005 Report (Phase 2) on the application by Belgium of the 1997 Convention on the Fight against Corruption of Foreign Public Officials in International Business Transactions and the 1997 Recommendation on Combating Corruption in International Business Transactions.
PART II. - Justice
CHAPTER I^er. - Interpretive provisions of articles of the Criminal Code
Art. 3. Article 246, § 2, of the Criminal Code, as amended by the Act of 10 February 1999, must be interpreted in the sense that it is also an active bribery to grant, directly or by interposition of persons, a person exercising a public service an advantage of any kind, for himself or for a third party, in order to adopt one of the behaviours referred to in Article 247.
Art. 4. Article 504bis, § 2, of the same Code, inserted by the law of February 10, 1999, must be interpreted in the sense that it is also a constituent of active private corruption, by granting, directly or through interposition of persons, to a person who has the capacity of administrator or manager of a legal person, agent or agent of a legal or physical person, an advantage of any kindsu, for himself or for the purpose of doing an act
CHAPTER II. - Provisions amending the Criminal Code
Art. 5. Section 250 of the same Code, as amended by the Act of 10 February 1999, is replaced as follows:
"Art. 250. Where the corruption provided for in articles 246 to 249 relates to a person performing a public service in a foreign State or in an organization of public international law, the penalties shall be those provided for in those provisions. »
Art. 6. Section 251 of the same Code, as amended by the Act of 10 February 1999, is repealed.
CHAPTER III. - Provision amending the Preliminary Title of the Code of Criminal Investigation
Art. 7. Section 10quater of the Preliminary Title of the Code of Criminal Investigation, inserted by the Act of 10 February 1999, is replaced as follows:
"Art. 10quater. § 1^er. To be prosecuted in Belgium any person who has committed outside the territory:
1° an offence under articles 246 to 249 of the Criminal Code;
2° an offence provided for in Article 250 of the same Code, where a person exercising a public service in a foreign State or in an organization of public international law is Belgian or where the organization of public international law for which the person exercises a public service has his seat in Belgium.
§ 2. Any Belgian or any person who has his or her principal residence in the territory of the Kingdom who, outside the territory of the kingdom, has been convicted of an offence under Article 250 of the Criminal Code may be prosecuted in Belgium, provided that the act is punished by the law of the country where it was committed. »
PART III. - Finance
Art. 8. Section 53 of the Income Tax Code 1992, as amended by the Acts of 30 March 1994, 7 April 1995 and 20 December 1995, by the Royal Decree of 20 December 1996 and the Acts of 7 March 2002, 24 December 2002, 28 April 2003, 10 May 2004 and 27 December 2004, is supplemented as follows:
"24° commissions, brokerages, commercial or other dividends, occasional or non-permanent vacations or fees, gratuities, rewards or benefits of any kind that are granted, directly or indirectly, to a person:
(a) in the context of public corruption in Belgium referred to in article 246 of the Criminal Code or private corruption in Belgium referred to in article 504bis of the same Code;
(b) in the context of public corruption of a person exercising public service in a foreign State or in an organization of public international law, referred to in section 250 of the same Code. »
Art. 9. Section 58 of the same Code, as amended by the Act of 10 February 1999, is repealed.
Art. 10. Article 205, § 2, paragraph 1^er, 2°, of the same Code, replaced by the Royal Decree of 20 December 1996 and amended by the laws of 28 April 2003 and of 2 May 2005, the words "21° to 23°; are replaced by the words "21° to 24°; "
Art. 11. In section 207, paragraph 2, of the same Code, replaced by the Act of 24 December 2002, the words "no financial benefits or any kind received under section 53, 24" are inserted between the words "subject to section 79" and the words "no attitude".
Art. 12. Article 219, paragraph 1^er, of the same Code, replaced by the Act of 4 May 1999, is supplemented by the words ", and the financial benefits or any nature referred to in section 53, 24°. "
Art. 13. Article 223, paragraph 1^er, 3°, of the same Code, repealed by the law of 15 December 2004, is reinstated in the following wording:
"3° of the financial benefits or of any kind referred to in section 53, 24°. »
Art. 14. In section 225, paragraph 2, of the same Code, as amended by the Act of 30 March 1994, by the Royal Decree of 20 December 1996 and by the Acts of 4 May 1999, 28 April 2003 and 15 December 2004, the 4th and 5th are replaced by the following provisions:
"4° at the rate of 300 p.c. on unjustified expenditures referred to in section 223, paragraph 1^er, 1°, and on the financial or any nature benefits referred to in section 223, paragraph 1^er3°;
5° at the rate referred to in 215, paragraph 1^eron contributions, pensions, annuities and allowances referred to in section 223, paragraph 1^er, 2°, and on the financial or any nature benefits referred to in section 223, paragraph 1^er3°; "
Art. 15. In section 233, paragraph 2, of the same Code, replaced by the law of May 4, 1999, the words "and concealed profits" are replaced by the words ", concealed profits and financial benefits or of any nature".
Art. 16. Article 234, paragraph 1^er, 4°, of the same Code, is supplemented by the words "and on the financial benefits or any nature referred to in section 53, 24°; "
Art. 17. Article 246, paragraph 1^er, 2°, of the same Code, replaced by the law of May 4, 1999, the words "and on the concealed profits" are replaced by the words ", on the concealed profits and on the financial benefits or of any kind referred to in section 233, paragraph 2,".
Art. 18. In section 247, 3°, of the same Code, as amended by the Act of 30 March 1994, the words "unsubstantiated expenses" are replaced by the words "unsubstantiated expenses and financial benefits or of any kind intended".
Art. 19. Article 463bis, § 2, 1°, of the same Code, replaced by the law of 12 August 2000, is repealed.
PART IV. - Entry into force
Art. 20. This Act comes into force on the day of its publication to the Belgian Monitor, with the exception of Article 14 which comes into force on 1^er January 2006 with respect to references to article 223, paragraph 1^er.
Given in Brussels, 1^er September 2006.
ALBERT
By the King:
Deputy Prime Minister and Minister of Justice,
Ms. L. ONKELINX
Deputy Prime Minister and Minister of Finance,
D. REYNDERS
The Secretary of State for the Modernization of Finance and the Fight against Tax Fraud,
H. JAMAR

Statement of Reasons
GENERAL
Ladies and gentlemen,
The purpose of the bill that the Government has the honour to submit to your deliberation is to transpose into Belgian law certain recommendations of the Working Group "Corruption in International Trade Transactions" of the Organisation for Economic Co-operation and Development (OECD) (hereinafter referred to as the "Working Group") which are repeated in conclusion of its 2005 Report (phase 2) on the application by Belgium of the 1997 Convention on the Fight against Corruption of
The report, which includes the detailed conclusions of the Argentine and Swiss experts, was adopted by the Working Group with recommendations in June 2005. It is available on the OECD website: http://www.oecd.org/dataoecd/58/51/35462014.pdf .
This report is based on information and documentation - laws, regulations, and others - provided by Belgium and those obtained during the field visit of the evaluation team in Brussels. During this on-site visit, five days in January 2005, the review team was able to interview members of various administrations of the Belgian State, as well as representatives of the private sector and civil society.
In general, the Working Group considers that the Belgian authorities have made significant efforts to implement the Convention and the Recommendation. However, it noted some gaps and recommended improvements in some areas.
In particular, he said that Belgian law allows under certain conditions the tax deductibility of undue benefits paid to public officials. It seems to it of fundamental importance that Belgian tax law adopts, as soon as possible, a general prohibition of tax deductibility of benefits of any kind paid to a foreign public official.
He also emphasized the obligation of Belgium to ensure an autonomous definition of the foreign public official in its national law in order to cover the full scope of application required by the Convention. In the same vein, it recommended that Belgium take corrective measures to ensure the full effectiveness of Belgian extraterritorial and universal jurisdictions over corruption offences committed outside Belgium.
The bill before you takes these recommendations into account. A number of other recommendations from the OECD Working Group are the subject of other government initiatives. Within the Criminal Policy Branch of the Federal Justice Public Service, an interdepartmental working group has been established, bringing together key players in the fight against corruption. The task of this working group is to analyse the recommendations of the 2005 OECD Report and to take the necessary initiatives to address them. A number of initiatives are aimed at raising public and private sector awareness and preventing corruption, while other measures will be taken to strengthen criminal and fiscal repression of corruption. This bill is part of the latter set of measures, such as the bill amending the Criminal Liability of Legal Persons Act, and the bill establishing a criminal record for legal persons.
The bill may be subdivided in a thematic manner and according to the provisions concerned in a legal and fiscal aspect.
PART I^er. - General provisions
COMMENT OF ARTICLES
Article 1^er
Pursuant to Article 83 of the Constitution, Article 1^er of this project specifies the matter to be resolved. The matter regulated by this draft is covered by Article 78 of the Constitution.
Article 2
This section states that the document that is based on the legislative amendments proposed by this Act is the OECD Report 2005.
PART II. - The legal component
GENERAL
The legal part of this bill contains in essence three amendments to the provisions of the Criminal Code relating to corruption. These amendments concern the definition of active corruption, the definition of the notion of foreign public officer and the extraterritorial jurisdiction of the Belgian judge for offences of corruption of foreign public officials.
1. Definition of the concept of corruption
Article 1.1 of the 1999 Convention defines active corruption as follows:
Each Party shall adopt the necessary measures for, under its law, to criminalize, where the act has been committed intentionally, to propose, offer or give, directly or through a person, any undue benefit to a foreign public official, for himself or another person, in order that he or she may perform or abstain from carrying out an act in his or her own capacity. '
In Belgian law, Article 246 of the Criminal Code provides a definition of active corruption and passive corruption. Active corruption is defined as:
"It is an active bribery that proposes, directly or through interposition of persons, to a person exercising a public service an offer, promise or advantage of any kind, for himself or for a third party, so that he or she adopts one of the behaviours referred to in section 247.
The Working Group expressed its doubts about the practical possibility of sanctioning the granting of an advantage to a public officer. While the OECD Convention requires that not only offer and promise be penalized, but also the granting of an advantage, the Penal Code criminalizes "the provision of an offer, promise or advantage of any kind." The review team found that this omission, which seems to be at first theoretical level, is likely to prevent the prosecution of certain persons involved in the commission of an offence (see the 2005 OECD Report, page 36).
The current definition of corruption under section 246 does not seem to cover the granting of an advantage. This is why the review team invited the Belgian authorities and the Working Group to follow and review this issue when case law exists.
Both the Belgian government and the judicial authorities that have to apply the legislation, however, believe that the definition of corruption systematically targets the granting of an advantage. Indeed, if a proposal to grant a benefit is already punishable, then it seems logical that the immediate award of the benefit, without even the promise, be it also. However, no case law has so far confirmed it.
Although the Working Group has only made a point "to be followed" in its report, and has therefore not made any recommendations regarding the adaptation of legislation in this regard, the Government is now of the view that it is advisable to proceed with the legal confirmation of the above-mentioned interpretation of the law. Therefore, in the preliminary draft of the original law, the granting of an advantage was expressly included in section 246 as part of the incriminated behaviour.
Nevertheless, the government stressed that it should not be deduced that the granting of an advantage was not so far covered by the definition. In its view, this has always been the case and this interpretation of the old legal text is now confirmed in the law.
In its opinion 40.381/2 of 29 May 2006, the Council of State deduced from the above passages that the intention was clearly to confer on articles 3 and 6 (public and private active corruption) of the draft law the scope of an interpretative law within the meaning of article 84 of the Constitution. Then, the Council of State recalled the principles of the interpretative legal provision, and, taking into account these principles, concluded that the use of the mechanism of an interpretative law is admissible in this matter, in the light of the reasons invoked in the statement of grounds.
The Government followed this reasoning of the Council of State and amended articles 3 and 6 of the draft law in this sense. The scope of an interpretative provision was conferred on the two provisions of the draft law, and they were consolidated in Chapter I of Part II of the preliminary draft, entitled "Interpretive Provisions of Articles of the Criminal Code".
2. Definition of the concept of "foreign public agent"
The OECD Convention on Combating Corruption of Foreign Public Officials in International Commercial Transactions only criminalizes - as the title of the Convention also suggests - the active corruption of foreign public officials. The quality to which the "foreign public agent" is to be corrupted is defined as follows in section 1^er of the Convention:
"For the purposes of this Convention, "foreign public officer" means any person who holds a legislative, administrative or judicial mandate in a foreign country, whether appointed or elected, any person exercising a public service for a foreign country, including a public enterprise or agency, and any employee or agent of a public international organization. »
Where other international anti-corruption instruments (such as the European Union and Council of Europe Conventions) refer to the internal definition of the country in which the foreign public official exercises its function, the OECD therefore imposes an autonomous definition of the concept on the Parties to the Convention.
In the various international instruments, there are two methodologies to define the foreign public agent: on the one hand, the autonomous approach used by the OECD and recently also by the United Nations and, on the other, the approach to refer to national law, as used by the European Union and the Council of Europe.
In the 1999 law, the Belgian legislator followed the approach of the European Union. Article 250, § 2, of the Criminal Code states that the quality of a person exercising a public service in another State is appreciated in accordance with the law of the State in which the person exercises that function. However, if it is a non-member State of the European Union, this quality is only recognized if the function concerned is also considered a public service in Belgian law (art. 250, § 2, in fine). The government justified the purpose of this additional condition by referring to possible very important differences that may exist between very distant legal systems on each other with regard to the appreciation of what is the exercise of a public service.
The aim was to avoid, as a result, that a person could be punished in Belgium while it is in no way likely to be considered-in accordance with our concepts - as exercising a public service, but would be regarded as such according to the law of the country of which it depends. The opposite standard, that is, a person who is a public agent according to our criteria but who is not subject to the right to which it depends, is not intended.
Already in phase 1 of the OECD review of Belgium, the Working Group had considered that this approach was not in line with the autonomous definition set out in Article 1^er the Convention and its objectives aimed at ensuring uniform implementation of the Convention. In particular, he expressed concern that the approach taken by Belgium did not affect the implementation of the Convention and, as a result, had recommended that this item be submitted to a further review during phase 2.
In this regard, the 2005 OECD Report states:
"The prosecutors of the public prosecutor's office and the instructions met by the review team, however, recognized that, for cases involving public officials from some remote countries, it would be necessary for them to rely on the advice of the authorities of the countries concerned in order to fully appreciate the question of whether or not the recipient of a bribe exercises a public service in their state. In the opinion of the reviewers, ensuring the cooperation of the foreign country to prove the quality of public officials could in practice prove difficult, especially for countries whose judicial authorities are not very inclined to cooperate in cases involving their own public decision makers. »
The conclusion of the report is that the Working Group finally recommended that Belgium take the necessary steps to ensure that the definition of "foreign public official" covers the entire scope of application required by the Convention and to define independently in Belgian law the notion of "foreign public official".
This is why the Government wishes to adapt and simplify articles 250 and 251 of the Criminal Code in order to comply with the 1999 Convention.
In short, the chosen option is the merging of articles 250 (foreign public officials) and 251 (for international public officials) into a single article. Section 250 will retain the assimilation rule without the restrictions previously contained in sections 250 and 251. Thus, in the area of repression, any person exercising a public service in a foreign State or in an organization of public international law is thus considered to be a Belgian public officials.
The government therefore does not opt for the inclusion in the Penal Code of a new definition of the notion of "foreign public agent" that would be in accordance with the definition contained in section 1^er the OECD Convention. It is the notion of "public service" that matters and must be interpreted as for Belgian public officials. In other words, the definition of a foreign public official is actually identical to that of a Belgian public official. Over the years, jurisprudence and doctrine have given a very broad interpretation of the concept of "public service", fully compliant and even beyond the definition contained in Article 1^er the OECD Convention.
The concept of "any person exercising a public service" covers all categories of persons who, regardless of their status, exercise a public service, regardless of their status (federal, regional, community, provincial, and communal public officials or public officials; elected agents [that is, any person holding a legislative, municipal or other mandate]; Public officers; temporary or permanent depositaries of a parcel of public power or public authority; persons even private, charged with a public service mission...). In addition, officials of private companies are presumed to perform public functions as the act of corruption affects a public service mission conferred on the company. The objective of the government is that it is not the status of the person concerned who is determining, but the function of the person concerned, which must be public. This functional approach is consistent with the interpretation given by previous jurisprudence. Thus, a political party official in single-party countries is considered to be a public official if he or she exercises public functions (Doc. Parl., Senate, 1997-98, 1-207/4, and D. Flore, Crime of Corruption. The new Belgian law of 10 February 1999, Brussels, Editions La Charte, 1999, p. 85).
This broad interpretation of the concept of "public service" will now also apply to the person who performs this function in a foreign state or in an organization of public international law, thus covering the entire scope of application required by the OECD Convention.
It is still questionable whether this approach to the concept of "foreign public official" is now still in line with the requirements of the European Union and the Council of Europe in the Conventions that the two international institutions have concluded in the fight against corruption. They have, in fact, that the quality of a foreign public official must be valued according to the law of the state in which that agent exercises his or her function.
The government considers that, in practice, the Belgian definition of the concept of "public service" is a broad definition that corresponds to a large extent to definitions used in other European Union countries, and that the appreciation of whether a person exercises a public service has already been largely harmonized within the European Union.
3. Rules of extraterritorial jurisdiction
The Act of 10 February 1999 inserted in the Preliminary Title of the Code of Criminal Procedure an article 10quater which aimed to broaden the extraterritorial jurisdiction of the Belgian judge with regard to offences of public corruption. This enlargement undoubtedly originates in international instruments, namely in Article 6 of the Protocol of 27 September 1996 to the Convention on the Protection of the Financial Interests of the European Communities, but also in Article 4.2 of the OECD Convention, which reads as follows:
"Every party with jurisdiction to prosecute its nationals on account of offences committed abroad shall take the necessary steps to establish its jurisdiction over the corruption of a foreign public official in accordance with the same principles. »
Article 10quater first goes well beyond what international instruments require, since it introduces universal jurisdiction. The article punishes "every person" and therefore concerns both Belgians and foreigners who commit an act of corruption abroad. However, a number of restrictive criteria are then introduced.
Article 10quater provides different regimes as the competent authority vis-à-vis the person exercising a public service is Belgium, another EU Member State, a non-EU Member State, one of the EU institutions or another international organization. The Working Group criticized this approach both in the first and second phase of the evaluation process. In any case, it considers in paragraph 3 of paragraph 2.1 of the assessment report for Phase 1, that the option of submitting the competence of the Belgian judge in matters of corruption in respect of a person exercising a public service in a non-EU State, on a condition of reciprocity, is not in accordance with the requirements of Article 4, paragraph 2, of the OECD Convention. The Working Group recommends that the Belgian authorities reconsider the issue.
The 2005 OECD Report goes even further:
"... However, doubts remain as to the effectiveness of extraterritorial jurisdiction for this offence as a result of the subordination of prosecutions to the filing of a complaint by the victim or a prior foreign official notice, as well as the requirement that the act be also punished by the legislation of the country in which it was committed. (...) Similar doubts exist with regard to the effectiveness of universal jurisdiction. The main reviewers recommend that the Belgian authorities take appropriate corrective measures to facilitate the exercise of Belgium's jurisdiction over offences of corruption of foreign public officials committed abroad. »
That is why the government decided to reform Article 10quater of the Preliminary Title of the Code of Criminal Procedure.
Article 10quater is now split into 2 paragraphs.
Paragraph 1^er maintains the principle of universality. Any person may be prosecuted in Belgium for acts of corruption committed abroad against Belgian public officials. Extraterritorial jurisdiction is unlimited for corruption involving persons who exercise public service in Belgium. This jurisdiction is based on the principle of protection under which a State may reserve the right to know offences committed abroad that are intended to infringe the legal interests of that State. "Belgian public official" means the Belgian public official who exercises his or her functions in a foreign state or in an organization of public international law (see article 10quater, § 1^er2°, in project).
It should also be added that the Belgian judge will always be empowered to know acts of corruption committed abroad in respect of public officials both Belgian and foreign when this public official exercises his office in a public international law organization with his seat in Belgium. This is justified on the one hand by the requirements of the EU Convention on Corruption and, on the other, by the many international organizations that have their seat in Belgian territory.
In accordance with Article 4.2. of the OECD Convention, the Belgian State must establish its extraterritorial jurisdiction over the corruption of a foreign public official in accordance with these same principles. According to the OECD, the distinction that the Belgian legislator once established between the public officials of EU member states and other foreign public officials poses a danger to equal treatment with respect to the rules of jurisdiction regarding corruption of foreign public officials.
Paragraph 2 of Article 10quater in draft therefore deletes this distinction. The condition that the legislation of the other State must also punish corruption that concerns a person who exercises a public service in Belgium is also abolished, as well as the requirement of prior notice given by the authorities of the foreign State. The only condition that remains is that of double criminality.
The OECD working group has criticized this condition, but the government considers that this dual criminality requirement is one of the "principles" referred to in Article 4.2 of the OECD Convention, and is therefore in compliance with the Convention requirement. As a response to the comment made by the State Council on this matter, it may be referred to § 26 of the Comments on the Convention:
"The nationality-based jurisdiction shall be exercised in accordance with the general principles and conditions applicable in the law of each Party. These principles include double criminality. However, the condition of double criminality must be deemed satisfied when the act is unlawful in the territory where it is committed, even if it has a different criminal qualification in that territory. »
In addition, extraterritorial jurisdiction now applies only when it comes to Belgians or persons with their main residence in Belgium. With regard to corruption involving foreign public officials, the principle of universality is therefore reduced to an active personality principle.
Note further that, although this § 2 largely resembles the provision contained in Article 7, § 1^erthe conditions provided for in Article 7, § 2, shall not apply in this case. Therefore, no complaint must be made by the victim, nor by the official opinion of the foreign authority, to allow prosecution of acts of corruption committed abroad to be possible. For these facts there is therefore a wider application of extraterritorial jurisdiction than for other facts (see Article 7).
COMMENT OF ARTICLES
CHAPTER I^er. - Interpretive provisions of articles of the Criminal Code
Article 3
This article is an interpretative provision of Article 246 of the Criminal Code, which contains the definitions of passive corruption and active corruption.
The Working Group expressed its doubts about the practical possibility of sanctioning the granting of an advantage to a public officer. This is the reason why the definition of incriminated behaviour is interpreted in the sense that the award of an advantage is also targeted.
Article 4
In order to harmonize the definitions of public corruption and private corruption, section 504bis of the Criminal Code is interpreted in the same direction as that provided for in section 246. It may therefore be referred to the explanation given in section 3 of the project.
CHAPTER II. - Provisions amending the Criminal Code
Article 5
This article amends section 250 of the Criminal Code, inserted by the Act of 10 February 1999 with the aim of criminalizing corruption involving foreign public officials. This provision was made up of persons who exercise a public service in a foreign state (a distinction being established according to whether or not it was part of the European Union) to Belgian public officials for corruption offences under articles 246 to 249. Article 251 was the same for persons exercising a public service in an organization of public international law.
Section 250 as amended in the project now merges old articles 250 and 251. They are similar to Belgian public officials: persons who exercise public service in a foreign state or in an organization of public international law.
As explained in the General Commentary, the notion of "public service" is not defined, but must be interpreted according to Belgian law. As has been sufficiently demonstrated, this interpretation is broader than the definition in section 1^er the OECD Convention, and is therefore in compliance with it.
Article 6
Since the former section 251 of the Criminal Code is now incorporated in new section 250, this section may be repealed.
CHAPTER III. - Provision amending the Preliminary Title of the Code of Criminal Procedure
Article 7
Article 7 amends Article 10quater of the Preliminary Title of the Code of Criminal Procedure and the split into two paragraphs.
The first paragraph introduces a universal jurisdiction of the Belgian judge for offences committed abroad by Belgians or foreigners, in cases of acts of corruption against either Belgian public officials who exercise their functions in Belgium, abroad or in an organisation of public international law, or foreign public officials who exercise their functions in an organisation of public international law with its headquarters in Belgium.
The second paragraph restricts the principle of universality of former article 10quater for offences of corruption against persons who exercise public service in a foreign state or in an organization of public international law and who are not Belgian. Only Belgians or persons with their main residence in Belgium can be prosecuted.
PART III. - The tax component
GENERAL
Article 1^er§ 1^erthe Convention on the Fight against Corruption of Foreign Public Officials in International Commercial Transactions - adopted on 21 November 1997 - provides as follows:
"Each party shall take the necessary measures to make a criminal offence under its law intentional, for any person, to offer, promise or grant an undue monetary or other benefit, directly or through intermediaries, to a foreign public official, for his or her benefit or for the benefit of a third party, for that agent to act or abstain from acting in the performance of official duties, in the interest of retaining an international advantage, »
Complementing the framework of previous recommendations and the Convention, the OECD adopted in 1996 a recommendation on "tax deductibility of bribes paid to foreign public officials". The latter "recommends that those of member countries that do not refuse the deductibility of bribes paid to foreign public officials review this treatment, with a view to denying this deductibility. Such action can be facilitated by the tendency to consider bribes paid to foreign public officials as illegal."
The 1997 revised Recommendation "Urges member countries to quickly implement the 1996 recommendation on deductibility of bribes paid to foreign public officials" and "recommends that each member country examines (...) tax laws, regulations and practices in order to eliminate anything that can indirectly promote corruption".
In Belgium, from a tax point of view, for the taxpayer who gives the proceeds of corruption, there are two possibilities:
First possibility: the taxpayer uses the opportunity to obtain authorization from the Minister of Finance to consider the "secret commission" as professional fees
In this case, section 58, paragraph 1^er, IIR 1992, provides as follows:
"In the event that the granting of secret commissions by companies is recognized as a common practice, the Minister of Finance may, at the request of the taxpayer, authorize that the amounts so allocated be considered a professional fee, provided that these commissions do not exceed the normal limits and that the company makes the payment of the related taxes, calculated at the rate fixed flatly by the Minister and which cannot be less than 20".
Section 463bis, § 2, 1°, IIR 92, provides that the flat rates and the minimum of 20 p.c. provided for in section 58 are increased by 3 additional cents.
As a result of the administrative commentary, five conditions that must be met simultaneously are required:
1°) the granting of secret commissions must be necessary to combat foreign competition; therefore, this preferential regime concerns only export industries and trades;
2°) the granting of secret commissions must be recognized as common practice in the sector concerned with the economy; in other words, necessary, usual and normal in a specified kind of business;
(3) the taxpayer shall, in order to obtain the benefit plan, apply to the Minister of Finance, who alone has the capacity to decide whether the commissions are necessary;
(4) The granting of secret commissions shall not exceed the normal limits; and
5°) the taxpayer must pay the fixed taxes flatly.
As long as these conditions are met and with the agreement of the Minister of Finance, the taxpayer may benefit from the derogatory regime under section 58, IRB 92. The lump sum tax is, like the secret commissions to which it relates, deductible as a professional fee.
Belgium believed to have complied with the revised 1997 recommendation by inserting, by the law of 10 February 1999 on the suppression of corruption, a paragraph 2 to article 58, IRB 92, which states:
"This authorization cannot be granted with respect to obtaining or maintaining public procurement or administrative authorizations. »
Second possibility: the taxpayer does not use the opportunity to obtain authorization from the Minister of Finance to have the "secret commission" considered professional fees
At the end of section 57, IRB 92, including the following expenses - commissions, brokerages, commercial or other dividends, occasional or non-permanent vacations or fees, gratuities, remuneration or benefits of any kind that constitute for the beneficiary of professional income - will be considered to be professional costs in respect of the tax of natural persons only if justified, prima facie, by the production of individual forms and, dundo,
If such expenses would not be justified in corporate tax, articles 219 and 463bis, § 1^er, 1°, ITA 92, provide that a separate contribution of 309 p.c. is established on the basis of the expenditures referred to in section 57, ITA 92, but section 197, ITA 92, states that these unjustified expenditures are considered to be professional costs.
Belgium believed to have complied with the revised 1997 recommendation:
- in the tax of natural persons, admitting deductibility only for non-secret commissions;
- in corporate tax, retaining the deductibility of bribes that are not taxed to 33.99 p.c. at the base but imposed separately to 309 p.c.
In point 179, p, of the 2005 OECD Report, the Working Group recommends that Belgium introduce into Belgian tax law a general prohibition of the tax deductibility of benefits of any kind paid to a foreign public official and that, as soon as possible, that is, to table a bill in Parliament before June 2006.
The provisions described below thus provide tax law in line with criminal law, but the separate contribution to corporate tax, corporate tax and non-resident tax (societies and legal entities) for those benefits related to corruption prohibited by the Criminal Code is retained.
COMMENT OF ARTICLES
Article 8
A new article 53, 24°, IIR 92, is inserted which imposes non-deductibility as professional fees of commissions, brokerages, commercial or other dividends, vacations or fees occasional or non-deductible, gratuities, rewards or benefits of any kind that are granted, directly or indirectly, as elements of public or private corruption in Belgium referred to in articles 246 and 504bis of the Criminal Code or in
This provision applies both to the tax of natural persons and to corporate tax and to non-resident tax.
Article 9
Article 58, IRB 92, which organized "the regime of secret commissions", is repealed by this draft article.
Since this kind of commission (this is a secret commission, so the beneficiary is never known) cannot determine whether it is a person who exercises a public service or not, the existing text cannot continue to exist without being potentially in contradiction with the non-deductibility rule that is introduced in section 53, 24°, IRB 92.
Article 10
Article 205, § 2, paragraph 1^erIRB 92, limits the deduction of "definitely taxed income" (TDD) and "exempt household income" (SMR) to the amount of the profits of the taxable period as it continues after the application of section 199, IRB 92, lessened by the following "bad unlicensed expenses":
1° of non-deductible liberalities as a professional charge, with the exception of liberalities deducted from profits pursuant to articles 199 and 200, IRB 92;
2° of the costs referred to in Article 53, 6° to 11°, 14° and 21° to 23°, IIR 92;
3° of interest, royalties and remuneration referred to in section 54, IRB 92;
4° of non-deductible interests referred to in Article 55, IRB 92;
5° of the contributions and premiums referred to in section 52, 3°, b, IRB 92, and the premiums assimilated by certain life insurance, to the extent that such premiums and premiums do not meet the conditions and limits set out in sections 59 and 195, ITA 92, as well as pension, supplementary pensions, rents and other allowances, taking place to the extent that these amounts do not meet the requirements set out in sections
6° of 25 p.c. of costs and less-values related to the use of cars, mixed cars and minibuses referred to in section 66, IIR 92, with the exception of fuel costs;
7° of dividends considered profit, referred to in Article 189, § 1^erIIR 92;
8° of the taxes referred to in section 198, paragraph 1^erIIR 92.
This draft article adds to Article 205, § 2, paragraph 1^er2°, IIR 92, the costs referred to in new article 53, 24°, IIR 92.
Article 11
Under the current provisions of section 207, paragraph 2, IRB 92, no deduction in particular with respect to exempt liberalities, permanently taxed income and exempt movable income, prior professional losses and investment deduction or compensation with the loss of the taxable period, may not be reduced to anormal or volunteer benefits received from a related corporation, unjustified expenditures referred to in section 219
This draft article amends this provision for the purpose that the financial or any kind received, referred to in section 219, IRB 92, cannot be exempted by other deductions.
Article 12
Article 219, paragraphs 1^er and 2, IRB 92, provides for the submission of expenses not justified by the documents referred to in Article 57, IRB 92, and the profits concealed, to a separate contribution that is set at 300 p.c. of these elements, which is to increase the additional contribution of crisis, pursuant to Article 463bis, § 1^erIIR 92.
This draft article adds to this list the financial or any nature benefits referred to in new article 53, 24°, IRB 92.
Article 13
This draft article adds the benefits referred to in new article 53, 24, IRB 92, to the elements referred to in article 223, paragraph 1^erIIR 92, which are taxable to the corporate tax.
Article 14
References to paragraph 1^er Article 223, IIR 92, are inserted in section 225, paragraph 2, 4 and 5, IIR 92, as a result of the addition of a paragraph 2 to section 223, IIR 92, by section 178, 2 of the Act of 27 December 2005 on various provisions, from 1^er January 2006.
The benefits referred to in new article 53, 24°, IIR 92, are added to section 225, paragraph 2, 4° and 5°, IIR 92, to be taxed at the rate of 300 p.c. and at the rate of 33 p.c. provided for in section 215, paragraph 1^er, IRB 92, so that these benefits will be affected by the non-deductibility of professional fees and the separate contribution provided for in section 219, IRB 92.
Articles 15 to 18
These draft articles amend articles 233, paragraph 2, 234, paragraph 1^er, 4°, 246, paragraph 1^er, 2°, and 247, 3°, IIR 92, in order to retain the special contribution of 300 p.c. to the tax of non-residents (societies and legal persons) as requested by the State Council.
Article 19
Section 463bis, § 2, 1°, IIR 92, provided that the flat rate and the minimum of 20 p.c. provided for in section 58 are increased by 3 additional cents.
As section 58, former IRB 92, is repealed by section 9 in draft, this provision is also repealed by this section in draft.
PART IV. - Entry into force
Rule 20
This section resolves the issue of the coming into force of this project.
This Act comes into force on the day of its publication to the Belgian Monitor, with the exception of Article 14 which comes into force from 1^er January 2006 with respect to references to article 223, paragraph 1^er.
Promulgation of this law, let us order that it be clothed with the seal of the State and published by the Belgian Monitor.
Given in Brussels, 1^er September 2006.
ALBERT
By the King:
Deputy Prime Minister and Minister of Justice,
Ms. L. ONKELINX
Deputy Prime Minister and Minister of Finance,
D. REYNDERS
The Secretary of State for the Modernization of Finance and the Fight against Tax Fraud,
H. JAMAR
Seal of the state seal:
The Minister of Justice,
Ms. L. ONKELINX
____
Note
(1) 2006-2007 session.
House of Representatives.
Documents. - Bill, 51-2677 - No. 1. - Report made on behalf of the commission, 51-2677 - No. 2. - Report made on behalf of the commission, 51-2677 - No. 3. - Text corrected by commission, 51-2677 - No. 4. - Text adopted in plenary and transmitted to the Senate, 51-2677 - No. 5.
Senat.
Documents. - Project referred to by the Senate, 3-2039 - No. 1. - Report made on behalf of the commission, 3-2039 - No. 2. - Decision not to amend, 3-2039 - No. 3.