At a certain point in time many taxpayers are liable for a maintenance allowance. This can originate from a judicial decision following for instance a divorce or originate from voluntary payments (in application of an agreement between creditor and debtor) made in favour of a parent or a child that is temporarily or permanently in need.
For the maintenance debtor the allowances paid are deductible for 80%, if they meet the conditions listed below and are also taxable for the maintenance creditor in the same proportion. In this respect we need to remind you of the obligation, that is many times disregarded, incumbent on the maintenance debtor to withhold the withholding tax on the allowance paid to foreign residents.
In order to claim the deduction of the maintenance allowance that was really paid, four cumulative conditions must be met:
1. It must be paid in application of a maintenance duty resulting from the Civil Code or the Judicial Code;
2. The beneficiary of the allowance may not be a part of the family of the person paying the allowance;
3. The payment must be justified on the basis of supporting documents;
4. The allowance must be paid on a regular basis.
The courts strictly judge these four conditions.
This is particularly the case for the fourth condition demanding that the maintenance allowance of which the deduction is requested, is paid on a regular basis.
This reflects an obvious objective: avoiding that the taxpayers demand the deduction of all payments made to their relatives for different reasons such as birthday, obtaining a diploma, …
If it is not so that the payments are requested to be made on a weekly or monthly basis, it is requested that these are made before the usual expiry date and without major delays.
The court of first instance of Antwerp has reminded us of that in a judgment of November 20th 2015.
In that case the court has excluded the deduction of allowances that were not paid on a regular basis, but were withheld on the holiday allowance of the maintenance debtor.
This reminds us of the fact that it is important to respect judgments and agreements providing the payment of a periodic allowance to a maintenance debtor. Besides the possible civil and penal sanctions there are indeed also negative fiscal consequences for the maintenance debtor.