Belgian Municipality Fights €2.8M Back-Tax Claim

The Autonomous Municipal Company (AGB) of Tongeren-Borgloon is taking the Belgian tax authorities to court over a demand for nearly €3 million in back taxes, fines, and interest. The Bijzondere Belastinginspectie (BBI) is seeking €2,773,573 in unpaid VAT related to dossiers from 2019 and 2020, inherited from the former AGB of Borgloon before the municipal merger that created Tongeren-Borgloon on January 1, 2025.

“That amount also includes fines and late-payment interest. The Board of Directors unanimously decided yesterday to contest that claim in court,” said Jo Dardenne, chairman of the AGB, following the board’s decision on Tuesday.

The VAT Dispute

The dispute centers on whether the AGB of Borgloon complied with conditions attached to VAT payment agreements made with the tax administration during large investment projects. Under Belgian rules, an AGB—an externally autonomous agency of a Flemish municipality—can arrange to spread VAT payments on major investments over an extended period.

The tax authorities argue those agreements were not honored, allowing the full VAT amount to be reclaimed. The AGB maintains it always followed the agreements made.

According to Dardenne, the tax authorities examined expenditures across several projects. “The tax authorities looked, among other things, at expenditures for the Loonse Tennisclub and local football club Hoger op Hoepertingen. Regarding those VAT costs, they largely went along with our arguments,” he told VRT NWS. “The largest part of the now-claimed amount comes from the dossier around the restoration of the syrup factory. There, the tax authorities rejected our rebuttal.”

The Stroopfabriek Restoration

The Stroopfabriek (syrup factory) in Borgloon is one of the last remaining remnants of the region’s industrial fruit-to-syrup processing heritage. In 2007, it won the “Monumentenstrijd” (Monument Battle), a public vote on VRT Canvas that awarded a €500,000 restoration budget—later increased to €550,000. The site was fully restored by March 2019 at a total cost of €8.6 million, with €4.7 million coming from subsidies. The restoration included a fruit experience center, a regional products shop, a bistro, and a function hall, with the main building resuming traditional syrup production.

Legal Strategy and Timeline

The BBI’s demand letter arrived at the AGB on July 9, 2026. During the summer, the entity consulted its own lawyers and sought a second opinion from another law firm before the board unanimously decided to pursue legal action.

“We have always kept to agreements made regarding VAT administration,” Dardenne said. “After the BBI letter arrived on July 9, we took action even during the summer holidays. We spoke with our own lawyers and also sought a second opinion from another law firm. Because we firmly believe in our position, it was also unanimously decided to take legal steps.”

The case is not expected to be heard before 2028, during which time fines and interest will continue to accrue. “That is indeed not tomorrow,” Dardenne acknowledged. “We believe we can win our case. If we succeed, all costs disappear.”

Financial Implications

The dispute has deeper roots. In June 2024, opposition member Wim Lambrechts (N-VA) brought the issue to light, revealing that the AGB had been aware of potential financial problems since December 2022. At that time, the claimed amount stood at €2,476,757—a figure that has since grown to €2,773,573 through accumulating interest and fines. VRT NWS reported that the financial director and political opposition had repeatedly warned the city government about the violations.

The merger between Tongeren and Borgloon in January 2025 meant the old AGB of Borgloon’s financial obligations, including this tax dispute, were inherited by the new merged entity. The Flemish government took over €21.4 million in debt from both municipalities as part of the merger. Regional outlet Het Nieuwsblad reported that the AGB described the claim as “unfairly charged,” insisting that “in fact, nothing illegal happened.”

If the AGB loses the case, it does not have the nearly €3 million available in its own funds. “That is a good question. We don’t have that money at the AGB itself,” Dardenne said. “The college of mayor and aldermen will then have to deliberate on that. If it comes to that, I cannot give an answer to that today.”

What’s Next

As the legal process unfolds, the AGB of Tongeren-Borgloon maintains its position that the tax claim is unfounded. The outcome will have significant implications for the merged municipality’s finances and potentially for its residents, who may ultimately bear the cost if the court rules against the AGB. With the case not expected to be heard until 2028 at the earliest, the dispute is set to remain a lingering concern for the young municipality.