Belgium

Introduction

In 2006, the Belgian tax authorities set up a Transfer Pricing investigation team. Additionally, the Belgian government issued an information note concerning the Transfer Pricing documentation.

Belgium has enacted specific Transfer Pricing documentation requirements in its tax legislation for financial years beginning on January 1, 2016, or later. These requirements are based on Action 13 of the OECD’s ‘BEPS’ Project.

The Belgian tax administration issued on February 25, 2020, a Circular Letter 2020/C/35 based on the 2017 version of the OECD Guidelines. The Circular confirms that the Belgian tax administration is under the fundamental principles of the Guidelines and the Arm’s Length Principle.

Arm’s Length Principle

In 2004, the Arm’s Length Principle was introduced into Belgian tax legislation for the first time. The Arm’s Length Principle is stipulated in Article 185(2) of the Belgian Income Tax Code of 1992.

Related Parties

There is no specific definition of “related party” in Belgian law. The tax authorities state that a party is related to another party through direct or indirect control in the management, control, or capital stock of the other or if a third party(es) directly or indirectly participates in the management, control, or capital stock of both parties.

The Royal Decree of August 10, 2009, directly refers to IAS 24 (International Accounting Standards) for further definitions of “related parties.” In this regard, a person or an entity may be considered a related party. A person (or a close member of the person’s family) is considered related if this has control or influence over the entity or has a managerial position therein. An entity is considered related if it is a subsidiary, associated subsidiary, associate, joint venture, or parent of the subject entity, or controlled, influenced, or managed by another party.

Transfer Pricing Methods

All methodologies included in the OECD Guidelines are accepted in Belgium. According to these Guidelines, the CUP method, the Resale Price Method, the Cost-Plus Method, the Profit Split Method, and the Transactional Net Margin Method (TNMM) are acceptable. Other methods may also be used if justifiable and appropriate.

There is no hierarchy within Transfer Pricing methods, although the Comparable Uncontrolled Price method is actually still the preferred one by the Belgian tax authorities.

The most appropriate transfer pricing method should be applied for a specific situation.

Transfer Pricing Documentation

Belgium has implemented three-tier Transfer Pricing documentation requirements in the Belgian Tax Law. The Transfer Pricing documentation regulations apply for fiscal years starting as of January 1, 2016. All files can be submitted in Dutch, French, German, or English; however, it is recommended to submit the Country-by-Country Report in English.

Belgium has issued specific forms for filing the Master File (Form 275MF) and the Local Report (Form 275LF).

Master File and Local Report

Taxpayers subject to the application scope of this article with a total of €50 million in operating and financial income (excluding extraordinary income) or a balance sheet total of €1000 million or an annual average number of employees of 100 (full-time equivalent).

The Master File must be filed to the Belgian tax authorities 12 months after the closing of the financial year of the Ultimate Parent Entity. The Master File must be filed within 12 months after the closing of the group’s reporting period, and the Local Report must be entered when filing the corporate income tax return of the Belgian company.

Country-by-Country Report

Taxpayers must file the return when they are groups with revenues exceeding €750 million. The Country-by-Country Report must be filed within 12 months after the closing of the group reporting period by and in the state of the ultimate parent company.

In addition, if the conditions for filing Country-by-Country Reports are met at the group level and, even though the Belgian company is not the ultimate parent company of the group, it must be notified to the Belgian tax authorities to inform them which entity of the group will file the Country-by-Country Reports.

Penalties

Specific penalties of €1,250 to €25,000 apply if the Transfer Pricing documentation is not filed or is incorrectly or incompletely filed.

Source: General Administration of Taxes

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