Belgium has introduced transfer pricing documentation and country by country reporting requirements through a Program Law of 1 July 2016.
While in practice it was already strongly recommended to keep the necessary transfer pricing documentation (as emphasized in Administrative Circulars on the matter), there was no formal requirement to do so under Belgian law.
In the context of the minimum standard imposed by OECD BEPS Action 13 on Transfer Pricing Documentation and Country-by-Country Reporting (issued in October 2015) and taking into account EU initiatives in this context, the Belgian legislator now adheres to this minimum standard by introducing transfer pricing documentation legislation in line with what is required by the OECD.
Based on the Program Law, qualifying Belgian corporate taxpayers will be required to follow the three-tiered approach introduced by the OECD and file a (i) Master File, (ii) Local File and (iii) Country-by-Country (CbC) report and such for all accounting years which start on or after 1 January 2016. The specific forms by which these filings must be made will be laid down in a Royal Decree.
Belgian group entities (including Belgian permanent establishments) of multinational groups must file a Master File with the Belgian tax administration and such within 12 months after the relevant financial year (reporting period).
The Master File must contain an overview of the multinational group, including a description of its business activities, its intangible fixed assets, intra-group transactions and the consolidated financial and tax position, its general transfer pricing policy and worldwide allocation of income and economic activities.
Belgian companies not exceeding one of the following criteria on a stand alone basis are exempt from the obligation to file a Master File:
- operating and financial income, non-recurrent income excluded, of EUR50 million;
- a balance sheet total of EUR1 billion;
- an annual average personnel number of 100 full time equivalents (FTE).
The same Belgian group entities must attach a Local File to their annual corporate income tax return (filing deadline in principle between six and nine months after financial year end).
The Local File must contain information on the local entity and a detailed information sheet regarding the transfer pricing analysis of the transactions between the local entity and the foreign entities of the multinational group, especially the relevant financial information regarding these transactions, the benchmarking study and the selection and application of the most appropriate transfer pricing method.
The detailed information sheet must only be filed for business divisions of Belgian group entities of which the total cross border intercompany transactions exceed EUR1 million.
Each Belgian group entity which is the ultimate parent entity of a multinational group must file a CbC Report with the Belgian tax administration within 12 months after the relevant financial year (reporting period).
Such is also the case for Belgian group entities which are not the ultimate parent entity of a multinational group if:
- the ultimate parent entity is not required to file a CbC report in its tax residence country;
- the jurisdiction of the ultimate parent company has at the latest 12 months after the reporting period no qualifying exchange of information agreement with Belgium; or
- the jurisdiction of the ultimate parent entity is systematically failing to exchange CbC Reports and the Belgian tax administration has informed the Belgian group entity thereof.
This obligation for a Belgian group entity (not being the ultimate parent company) to file a CbC Report with the Belgian tax administration does not apply if:
- the multinational group has more than one group entity with tax residency in the European Union (EU) and has appointed one of these group entities to fulfil the above filing requirement in its local jurisdiction; or
- the multinational group has appointed a surrogate parent entity to file the CbC report in its jurisdiction provided that such filing is required by that jurisdiction and certain other conditions are met.
The CbC reporting requirement does not apply for multinational groups with a consolidated annual gross group revenue of less than EUR750 million.
The information to be disclosed in the CbC Report under Belgian legislation is in line with what is prescribed by the OECD and the Belgian tax administration will use these reports to examine transfer pricing risks and risks of base erosion or profit shifting as well as for economic and statistical analyses.
Filing language and penalties
The Program Law of 1 July 2016 stipulates that the Master File, Local File and CbC Report can be filed in English but that the tax administration can require a translation in one of the Belgian official languages (Dutch, French and German) upon audit. Practice shows that tax inspectors do typically not require such translation.
Non compliance with the new transfer pricing reporting requirements will result in penalties of EUR1,250 to EUR25,000 can be imposed as of the second violation.