Tax Investigation ans Assessment Periods: a Welcome Reduction

Tax Procedure

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The ordinary time limits for tax investigations and tax assessments have been simplified and reduced, as announced in last year's Government Agreement. Four different time limits previously coexisted, ranging from 3 to 10 years; only three remain, ranging from 3 to 7 years. The reform applies retroactively and therefore neutralizes the significant extensions introduced in 2022.  SITUATION NEW TIME LIMIT PREVIOUS TIME LIMIT Standard 3 years 3 years(unchanged) Failure to file (absent or late return) 4 years 4 years(unchanged) Complex returns (legal arrangements, hybrid mismatches, transfer pricing, etc.) 4 years 6 years/10 years Tax fraud (prior notification mandatory) 7 years 10 years Retention of books and documents 7 years 10 years

1. NEW TAX INVESTIGATION AND ASSESSMENT TIME LIMITS

Before the reform, the investigation and assessment periods were as follows: 

• 3 years in ordinary cases 
• 4 years where no return was filed, or was filed late 
• 6 years for so‑called semi‑complex returns 
• 10 years in cases of fraud and for certain complex returns 

Three time limits now remain: 

• 3 years as the standard period
• 4 years where no return has been filed, or has been filed late (and for complex returns, see below)
• 7 years in case of tax fraud

Complex returns are no longer governed by the 6-year and 10-year time limits: they now fall within the 4-year period. A return is regarded as complex where it relates to: 

• reportable legal arrangements;
• reportable hybrid mismatch arrangements;
• undistributed profits arising from a non‑genuine tax arrangement;
• payments to tax havens subject to specific reporting obligations;
• companies belonging to a multinational group subject to transfer pricing documentation obligations (namely a group with consolidated revenue of at least EUR 750 million, or a group with more than EUR 50 million in operating and financial income, a balance sheet total exceeding EUR 1 billion, or an average headcount of 100 or more);
• returns including a credit for the notional foreign tax credit;
• withholding tax returns involving exemptions, waivers or reductions under tax treaties or EU directives;

• information obtained from abroad regarding:

  • cross‑border arrangements subject to a reporting obligation; and
  • information from platform operators where the data relating to a taxpayer amounts to at least EUR 25,000.

In the event of fraud, the tax authorities must now notify the taxpayer in advance of the presumptions of fraud and of their intention to apply the extended 7-year period.

Starting point of the time limits

The limitation periods start on 1 January of the relevant tax year. For companies whose financial year closes on a date other than 31 December, the periods run from that closing date. 

Example: income earned in 2025 and subject to personal income tax falls under tax year 2026. The ordinary investigation and assessment period therefore starts on 1 January 2026 and runs until 31 December 2028. The same applies to corporate income tax for a financial year closed on 31 December 2025.

2. RETENTION OF BOOKS AND RECORDS

In parallel with the reduction of the investigation and assessment periods, the statutory retention period for accounting books and supporting documents has been reduced from 10 years to 7 years. This aligns record-keeping obligations with the new audit time limits and makes the framework clearer for taxpayers. 

3. ENTRY INTO FORCE

The new time limits apply retroactively from tax year 2023 and render ineffective the extensions of the limitation periods introduced in 2022. 

4. COMMENTS

This simplification and reduction of the time limits significantly enhances legal certainty for taxpayers. Except in cases of fraud, the tax authorities can no longer reassess returns filed up to 10 years earlier: in most cases the maximum period is now 4 years.

The reform also strengthens due process safeguards. Reconstructing facts and gathering evidence many years after the relevant event is often difficult, if not impossible, particularly in complex or international matters. For businesses, a 10-year period compounded the difficulty, as the staff in place at the time of the events was often no longer present.

 

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This document is of a general nature, for information purpose, and does not constitute a custom made personal advice. Although carefully drafted, it should not be relied upon as legal advice and as such does not engage any liability of the law firm Advisius.

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