Overview

Principal legislation

Identify the principal transfer pricing legislation.

Below is a summary of the main federal legislation regulating transfer pricing in Belgium.

Upward adjustment

A Belgian taxpayer’s taxable basis is increased by the abnormal or benevolent advantages that it grants to a beneficiary (article 26 of the Income Tax Code). No profit adjustment is made if these advantages are considered to determine the beneficiary’s taxable basis (ie, escape clause). Irrespective of whether the advantage has been considered to determine the beneficiary’s taxable basis, a profit adjustment will be made if the beneficiary is:

  • a non-resident company with which the Belgian taxpayer has a direct or indirect relationship of interdependence;
  • a non-resident company or establishment that is established in a tax haven; or
  • a non-resident company that shares common interests with a non-resident company or establishment referred to above.

Belgian law does not define the concept of an ‘abnormal or benevolent advantage’, but the Belgian Tax Authority’s (BTA’s) official commentary on the Income Tax Code states that it includes any enrichment of the recipient without adequate and actual consideration. An ‘advantage’ is defined as an enrichment of the recipient without equivalent real compensation to the grantor for the benefit provided. ‘Abnormal’ is defined as that which is not consistent with common practice. A ‘benevolent advantage’ is an advantage granted without a contractual obligation or sufficient consideration - an intentional element is not required.

Whether an abnormal or benevolent advantage is granted requires a factual assessment that considers factors such as:

  • the economic circumstances of the case at hand;
  • the situation in which the parties are involved; and
  • all other factual circumstances.

Article 185, Section 2a of the Income Tax Code governs the recognition of profits on cross-border commercial and financial transactions for Belgian taxpayers that are members of multinational groups. Any profits not recognised by an arm’s-length cross-border transaction are added to the taxpayer’s taxable profit.

Article 185/2 of the Income Tax Code has introduced controlled foreign company (CFC) legislation into Belgian law following the implementation of the EU Anti-tax Avoidance Directive (2016/1164/EC), which lays down the rules against tax avoidance practices that directly affect the functioning of the internal market. Belgium has opted to implement option B of the EU Anti-tax Avoidance Directive, pursuant to which the CFC income taxable in Belgium is the non-distributed income of a low-taxed foreign subsidiary or permanent establishment that is generated through risks and assets that are linked to significant people functions performed by the Belgian parent company. The implementation of the CFC rule concerns the legislative incorporation of the ‘authorised OECD approach’ principles as introduced by the OECD in relation to the attribution of profits to permanent establishments. The CFC rule constitutes another means for the BTA to perform transfer pricing adjustments.

Other general corporate tax rules indirectly regulate or impact transfer pricing (eg, provisions regarding tax deductibility of interest and other excessive business expenses or payments to tax haven entities).

Downward adjustment

Under certain circumstances, article 185, section 2b of the Income Tax Code allows a corresponding downward profit adjustment for corporate income tax purposes in case profits are included in the tax basis of a related foreign company located in a treaty jurisdiction.

Articles 79 and 207 of the Income Tax Code deny deductions (eg, carry-forward tax losses) from profits derived from an abnormal or benevolent advantage received by a taxpayer where there is a relationship of direct or indirect interdependence between the parties.

The above provisions aim to prevent the shifting of profits to a Belgian company where the amount is not subject to tax given the availability of certain tax deductions. In the context of article 207 of the Income Tax Code, the Supreme Court has broadened the definition of an ‘abnormal or benevolent advantage’ by including the results from transactions that take place in economically abnormal circumstances.

Documentation

In 2016, Belgium implemented the transfer pricing documentation and reporting obligations in its national legislation (articles 321/1-321/7 of the Income Tax Code). These new requirements consist of filing a country-by-country report in respect of the group’s Belgian parent and filing a master file and local file in respect of Belgian group entities.

Enforcement agency

Which central government agency has primary responsibility for enforcing the transfer pricing rules?

On 1 July 2006, the transfer pricing unit (TP Unit) was officially established as a special department of the BTA. The TP Unit is an autonomous team that operates as a knowledge centre and provides technical and operational assistance in transfer pricing audits and transfer pricing disputes. The TP Unit is also authorised to perform transfer pricing audits of Belgian enterprise members of multinational groups.

As from 2018, transfer pricing audits are no longer the exclusive competence of the TP Unit and are being carried out on a larger scale by the general regional centres within the BTA responsible for large enterprises working with the TP Unit.

OECD guidelines

What is the role of the OECD Transfer Pricing Guidelines?

Although not expressly stated in the law, the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD Guidelines) are generally followed in Belgian tax practice and accepted by the BTA, in particular by the TP Unit and the Ruling Commission. In addition, the 1999 circular makes explicit reference to the OECD Guidelines and the 2006 circular is fully aligned with the provisions of the OECD Guidelines. While the administrative guidelines are based on the 1995 OECD Guidelines, the BTA does apply the 2010 update in practice. In the draft circular of 9 November 2018, it was confirmed that the BTA adheres to the principles of the 2017 OECD Guidelines.

The OECD Guidelines and other OECD reports (eg, the OECD 2010 Report on the Attribution of Profits to Permanent Establishments) play a central role in the Belgian transfer pricing framework. The BTA refers to these documents and reports published in the framework of BEPS as part of their daily practice. The fact that the OECD initiatives are followed and applied to the letter by the BTA and that no deviating rules exist in the Belgian legal framework gives significant legal certainty to multinationals investing in Belgium.

The Belgian Minister of Finance has recently stated that the new OECD guidance on BEPS Actions 8-10 will be applied by the BTA in transfer pricing audits.

Covered transactions

To what types of transactions do the transfer pricing rules apply?

All transactions that take place with related or associated parties are subject to the Belgian transfer pricing rules. The transactions include, but are not limited to:

  • sale of products;
  • all financial transactions;
  • service arrangements;
  • the transfer and concession of technology (eg, patents, know-how); and
  • cost-sharing agreements.
Arm’s-length principle

Do the relevant transfer pricing rules adhere to the arm’s-length principle?

Yes.

Base erosion and profit shifting

How has the OECD’s project on base erosion and profit shifting (BEPS) affected the applicable transfer pricing rules?

Belgium has adopted the following measures resulting from or inspired by the BEPS recommendations.

Belgium introduced an anti-hybrid instruments rule in its participation exemption regime as a result of the implementation of EU Directive 2014/86/EU amending the EU Parent-Subsidiary Directive (2011/96/EU) (BEPS Action 2).

Belgium repealed its patent income deduction regime and replaced it with a new innovation income deduction regime in line with the modified nexus approach as of 1 July 2016 (BEPS Action 5).

Belgium introduced a regime for the automatic exchange of information on tax rulings (including all arrangements concerning transfer pricing and the allocation of profits to permanent establishments) issued on or after 1 January 2017 as well as, under certain conditions, tax rulings issued, amended or renewed between 1 January 2012 and 31 December 2016 as a result of the implementation of EU Directive 2015/2376/EU amending EU Directive 2011/16/EU regarding administrative cooperation in the field of taxation (BEPS Action 5). Before its implementation, Belgium had already begun spontaneously exchanging rulings with other EU member states.

Belgium introduced transfer pricing documentation and reporting requirements through country-by-country reporting and the two-tiered master and local file as a result of the implementation of EU Directive 2016/881/EU amending EU Directive 2011/16/EU regarding the mandatory automatic exchange of information in the field of taxation (BEPS Action 13). These requirements apply for financial years starting from 1 January 2016.

Belgium signed the Multilateral Instrument on 7 June 2017 (BEPS Action 15) and notified that 98 of its 104 tax treaties will be covered therein. It opted to include in these treaties:

  • the hybrid mismatch provision;
  • the provision on binding arbitration and closing of pending cases within 24 months;
  • the anti-fragmentation and commissionaire provisions amending the permanent establishment definition; and
  • the principal purpose test provision.

Belgium transposed the EU Anti-tax Avoidance Directive (2016/1164/EC) and the revised EU Anti-tax Avoidance Directive (2017/952/EU) into domestic law. As a result, new provisions in the Belgian Income Tax Code containing measures neutralising hybrid mismatches (within the EU and towards third countries), controlled foreign company legislation, an exit taxation and step-up regime, and the interest limitation rule will enter into effect as of 2019.

In the draft circular of 9 November 2018, it was confirmed that the BTA adheres to the principles of the 2017 OECD Guidelines. The Belgian Minister of Finance stated that the OECD Guidelines will be followed, and applied new guidance on ongoing audits.

Pricing methods

Accepted methods

What transfer pricing methods are acceptable? What are the pros and cons of each method?

The following methods that the OECD Guidelines address are accepted and employed under Belgian transfer pricing practice:

  • traditional methods, including:
    • the comparable controlled price method, which is usually applied where external or internal comparables are available (this is typically the case for intragroup financing transactions);
    • the cost-plus method, which is usually applied for intragroup services or manufacturing activities with low added value and makes use of external and internal comparables; and
    • the resale price method, which is often used in case of intragroup distribution activities; and
  • transactional methods, including:
    • the transactional net margin method, which is most often applied, given the practical difficulties in applying other methods; and
    • the profit split method, which is often applied for integrated transactions.

In addition, for specific types of transaction (eg, those involving the transfer intangible assets) other valuation-based methods are applied and accepted in practice, such as the relief of royalty method or a residual discounted cash flow.

Cost-sharing

Are cost-sharing arrangements permitted? Describe the acceptable cost-sharing pricing methods.

Cost-sharing arrangements are permitted. The draft circular has adopted the OECD Guidelines.

Best method

What are the rules for selecting a transfer pricing method?

There are no special considerations or issues specific to Belgium that associated parties should bear in mind when selecting transfer pricing methods. Belgium has no official hierarchy of acceptable methods, no best method rule and no legal limits or restrictions in this respect.

Taxpayer-initiated adjustments

Can a taxpayer make transfer pricing adjustments?

Yes, it is possible to make adjustments in the tax return.

Safe harbours

Are special ‘safe harbour’ methods available for certain types of related-party transactions? What are these methods and what types of transactions do they apply to?

Belgium has no formal safe harbour rules. However, the draft circular of 9 November 2018 accepts, under certain conditions, the 5 per cent mark-up for low value-adding services in line with the OECD Guidelines.

Disclosures and documentation

Documentation

Does the tax authority require taxpayers to submit transfer pricing documentation? Regardless of whether transfer pricing documentation is required, does preparing documentation confer any other benefits?

Each Belgian group entity must file a master and local file if at least one of the following thresholds is exceeded on the basis of the standalone annual accounts of the financial year immediately preceding the previous financial year:

  • a total operational and financial income of €50 million;
  • a balance sheet total of €1 billion; and
  • an annual average of 100 full-time employees.

The master file and the local file can be submitted in Dutch, French and English.

The master file must include an overview of:

  • the group;
  • its intangibles;
  • intragroup financial transactions;
  • the group’s consolidated financial and fiscal position; and
  • the group’s overall transfer pricing policy.

The master file must be submitted to the BTA within 12 months from the reporting period.

The Belgian local file deviates from the local file standard under the OECD Guidelines. The local file consists of:

  • general business and financial information concerning the local entity; and
  • financial information on intercompany transactions and transfer pricing methods.

The second part must be filed only if at least one of the respective entity’s business units has carried out cross-border intercompany transactions exceeding €1 million in the preceding financial year.

The local file must be filed at the latest on the deadline of the annual corporate income tax return.

In addition, it is of paramount importance to prepare thorough transfer pricing documentation that is in line with the OECD Guidelines, even if the group does not fall within the mandatory scope of the law on documentation requirements. Well prepared documentation will likely decrease the chances of an in-depth tax audit.

It is also essential that actual prices and intercompany transactions are in line with the transfer pricing analysis and can be reconciled with the group’s financial statements.

Country-by-country reporting

Has the tax authority proposed or adopted country-by-country reporting? What are the differences between the local country-by-country reporting rules and the consensus framework of Chapter 5 of the OECD Transfer Pricing Guidelines?

Under article 321/2 of the Income Tax Code, the Belgian parent entities of multinational groups with a consolidated gross revenue exceeding €750 million must file a country-by-country report that includes financial information (eg, revenue, profit before income tax, income tax paid and accrued and number of employees) on the multinational group’s entities for every jurisdiction in which it is active. The same obligation applies to Belgian companies:

  • that are members of a qualifying group and have been appointed as surrogate parent entities for country-by-country report filing purposes; or
  • in the absence of an appointed surrogate parent, when the ultimate parent is established in a country that did not introduce the country-by-country report obligations or did not exchange its country-by-country report with Belgium.

In addition, a notification duty applies for each Belgian entity regarding the identity and jurisdiction of the group entity responsible for filing the country-by-country report on behalf of the group. As from the reporting periods ending on 31 December 2019 or later, the filing of a notification will only be required if the information previously reported with regard to the entity responsible for filing the country-by-country report has changed.

Timing of documentation

When must a taxpayer prepare and submit transfer pricing documentation?

Documentation must be submitted according to the following rules:

  • the master file must be submitted to the BTA within 12 months from the reporting period;
  • the local file must be filed at the latest on the deadline of the annual corporate income tax return;
  • the country-by-country report must be submitted to the BTA within 12 months from the report period; and
  • the country-by-country reporting notification must be submitted to the BTA at the latest on the last day of the reporting period.
Failure to document

What are the consequences for failing to submit documentation?

Failure to comply with the new documentation requirements within the above-mentioned time frames triggers administrative fines amounting to between €1,250 and €25,000 as of the second violation.

Adjustments and settlement

Limitation period for authority review

How long does the tax authority have to review an income tax return?

The BTA can in principle only apply tax adjustments and claim additional taxes to be paid within three years before the assessment year. This three-year limitation period is extended by four years in the case of wilful attempts to defeat or evade tax.

As of 2018, no deduction of current year losses and deferred tax assets (eg, carry-forward tax losses) can be made on a taxable basis as a result of a tax audit, except in relation to dividends received during the same taxable period. The new rule does not apply for infractions committed negligently and for which no tax increases are applied.

Rules and standards

What rules, standards or procedures govern the tax authorities’ review of companies’ compliance with transfer pricing rules? Does the tax authority or the taxpayer have the burden of proof?

The BTA is subject to the general rules and procedures with respect to tax audits. In addition, on 14 November 2006 a circular was published containing general guidance for tax inspectors and taxpayers on how a transfer pricing audit should be performed.

When a taxpayer provides insufficient information or documentation during a tax audit, the BTA can impose a tax assessment ex officio. This implies a reversal of the burden of proof. As such, it is up to the taxpayer to demonstrate that the profits declared are correct and at arm’s length.

Disputing adjustments

If the tax authority asserts a transfer pricing adjustment, what options does the taxpayer have to dispute the adjustment?

Internal remedies stipulated by Belgian domestic tax legislation (ie, an administrative appeal that can be followed by a judicial appeal) can be applied to dispute a transfer pricing adjustment.

Secondly, a mutual agreement procedure can be applied. This procedure is based on a double tax treaty and an arbitration procedure by virtue of the EU Arbitration Convention (90/436/EEC). Following the EU Council Directive of 10 October 2017 on Tax Dispute Resolution Mechanisms in the European Union, Belgium implemented a new mechanism regarding tax disputes within the EU, which is applicable as from financial year 2018. Under this new procedure, there is an obligation for member states to reach a solution under a mutual agreement procedure within a certain time limit. This procedure can be requested as from 1 July 2019.

Relief from double taxation

Tax-treaty network

Does the country have a comprehensive income tax treaty network? Do these treaties have effective mutual agreement procedures?

Belgium has concluded more than 90 tax treaties, most of which contain provisions on:

  • the arm’s-length principle;
  • the exchange of information; and
  • the mutual agreement procedure.
Requesting relief

How can a taxpayer request relief from double taxation under the mutual agreement procedure of a tax treaty? Are there published procedures?

Belgium grants access to the mutual agreement procedure in cases where a transfer pricing dispute has arisen between a taxpayer and the BTA or a foreign tax authority. As an EU member, and under the EU Arbitration Convention, Belgium must resolve any double taxation arising from EU transfer pricing cases. The Circular letter of 7 March 2018 contains the procedure with regard to the mutual agreement procedure.

Following the implementation of the EU Council Directive of 10 October 2017 on Tax Dispute Resolution Mechanisms in the European Union, a new mutual agreement procedure with the obligation for member states to reach a solution was implemented in Belgian law. This procedure is applicable as from financial year 2018 and can be requested as from 1 July 2019.

When relief is available

When may a taxpayer request assistance from the competent authority?

For the mutual agreement procedure, it is not necessary that internal remedies stipulated by Belgian domestic tax legislation are exhausted or that a tax assessment has occurred. An audit settlement is also not an obstacle to the functioning of the mutual agreement procedure.

Limits on relief

Are there limitations on the type of relief that the competent authority will seek, both generally and in specific cases?

No.

Success rate

How effective is the competent authority in obtaining relief from double taxation?

Mutual agreement procedures are highly effective in Belgium and give multinational businesses comfort when establishing themselves in Belgium. The BTA is known for its responsiveness, willingness to cooperate and results orientation.

Advance pricing agreements

Availability

Does the country have an advance pricing agreement (APA) programme? If so, is the programme widely used? Are unilateral, bilateral and multilateral APAs available?

Taxpayers who wish to obtain certainty in advance and avoid potential transfer pricing disputes may obtain advance pricing agreements (APAs). Unilateral APAs can be obtained from the Ruling Commission, which is a dedicated central and autonomous service within the Federal Ministry of Finance and independent of the BTA.

Unilateral APAs in transfer pricing matters deal with the arm’s-length character of a given price or remuneration based on:

  • the functions performed;
  • the risks assumed; and
  • the assets used.

APAs typically require a transfer pricing study that includes a functional analysis, a description of the methods used and a comparability analysis. Under certain circumstances, a limited transfer pricing report may suffice. The Ruling Commission generally has a cooperative attitude towards the taxpayer. Bilateral or multilateral APAs can be obtained through the Department of International Conventions.

Unilateral, bilateral or multilateral APAs may cover any (interpretative) issues regarding transfer pricing or the attribution of profits to permanent establishments. In this way, all transactions and entities subject to transfer pricing rules can be covered by APAs.

Process

Describe the process for obtaining an APA, including a brief description of the submission requirements and any applicable user fees.

A unilateral, bilateral or multilateral APA must be requested in writing (via registered mail, regular mail or email) from the Ruling Commission and the Department of International Conventions, respectively, either by the company concerned or by proxy (eg, a lawyer). It is only possible to request a tax ruling in relation to the tax consequences of a transaction or a situation that did not have consequences for tax purposes at the time of the submission of the ruling request. Prior to submitting an official APA request, it is possible to have a pre-filing meeting with the Ruling Commission.

Following a positive pre-filing meeting, an APA request is submitted. This must include the following information:

  • the identity of all parties and a description of the group and its activities;
  • the APA’s lifespan;
  • a description of any intercompany transactions;
  • details of the transfer pricing method used (if any);
  • a comparability study (if available);
  • a functional analysis;
  • unilateral rulings obtained by the group (if available)
  • the proxy of the person who filed the request (if available);
  • financial information regarding the company concerned; and
  • references to the applicable legal provisions at hand.

The filing of a unilateral, bilateral or multilateral APA is free of charge in Belgium.

Time frame

How long does it typically take to obtain a unilateral and a bilateral APA?

Unilateral APAs are generally obtained within three to six months, provided that all required information has been submitted on time.

Where it concerns a relatively simple case, concluding a bilateral or multilateral APA takes approximately one year from when the competent authorities concerned are availed of all relevant information. However, this is usually prolonged to two to three years when cases are more complex.

A subsequent request to renew the APA must be filed at least six months before the expiration of the existing one.

Duration

How many years can an APA cover prospectively? Are rollbacks available?

In general, APAs are valid for a maximum period of five years.

When the relevant facts and circumstances are identical to those in previous tax years, the taxpayer can ask for a rollback. In such cases, the outcome of the bilateral or multilateral APA can also be applied for the previous years. Rollback is available only if the applicable time limits (eg, the tax assessment terms) allow it.

Scope

What types of related-party transactions or issues can be covered by APAs?

All transactions and entities subject to transfer pricing rules can be covered by APAs.

Independence

Is the APA programme independent from the tax authority’s examination function? Is it independent from the competent authority staff that handle other double tax cases?

The APA programme is fully independent of the tax authority’s examination function.

Advantages and disadvantages

What are the key advantages and disadvantages to obtaining an APA with the tax authority?

Legal certainty is obtained with regard to the application of transfer pricing legislation to a specific situation or (intercompany) transaction for a period of five years.

As of 2017, APAs are exchanged with the other jurisdictions involved that mutually exchange ruling decisions with Belgium.

Special topics

Recharacterisation

Is the tax authority generally required to respect the form of related-party transactions as actually structured? In what circumstances can the tax authority disregard or recharacterise related-party transactions?

In the draft circular of 9 November 2018, it was confirmed that the BTA adheres to the principles of the 2017 OECD Guidelines, which allow for a recharacterisation under exceptional circumstances.

Belgian tax law also contains a general anti-abuse rule (GAAR), which aims to prevent tax evasion or avoidance and which adopted a fraus legis approach. With the revised article 344, section 1 of the Income Tax Code, containing the new GAAR, the fundamental right of taxpayers to freely choose the route of least taxation continues to exist but has been further restricted. This was done to resolve any issues of application of the previous version of the GAAR and allow the Belgian Tax Authority to efficiently counter tax abuse, without any misinterpretation of the law.

If an abuse of tax law has been established, the taxpayer must prove that there were underlying reasons for his or her acts, other than to avoid paying income tax. In the event that the taxpayer cannot provide this counter proof, the BTA must correct the taxpayer’s taxable base. In doing so, the transaction will be subject to tax, in accordance with the objectives of the law, as if the abuse had not taken place.

Selecting comparables

What are some of the important factors that the tax authority takes into account in selecting and evaluating comparables? In particular, does the tax authority require the use of country-specific comparable companies, or are comparables from several jurisdictions acceptable?

Regarding the search for comparables and the performance of benchmark studies, the BTA accepts the use of both pan-European databases and, under certain circumstances (eg, the absence of such reliable data), non-European databases, if deemed appropriate.

Secret comparables

What is the tax authority’s position and practice with respect to secret comparables? If secret comparables are ever used, what procedures are in place to allow a taxpayer to defend its own transfer pricing position against the tax authority’s position based on secret comparables?

Secret comparables are not used by the BTA.

Secondary adjustments

Are secondary transfer pricing adjustments required? What form do they take and what are their tax consequences? Are procedures available to obtain relief from the adverse tax consequences of certain secondary adjustments?

No.

Non-deductible intercompany payments

Are any categories of intercompany payments non-deductible?

Belgian tax law does not contain provisions limiting the deductibility of certain categories of intercompany payments.

However, there are other provisions applicable to certain categories of payments, irrespective of whether they are made to a related or unrelated party, such as payments to tax haven entities, that apply and indirectly regulate or impact transfer pricing. An interest limitation rule foresees that exceeding borrowing costs will be deductible in the tax period in which they are incurred only up to the higher of 30 per cent of the taxpayer’s EBITDA or €3,000,000. In particular circumstances, deductible interest payments on current account advances are capped.

Anti-avoidance

What legislative and regulatory initiatives (besides transfer pricing rules) has the government taken to combat tax avoidance with respect to related-party transactions? What are the penalties or other consequences for non-compliance with these anti-avoidance provisions?

Belgian tax law has a general anti-abuse rule (article 344, section 1 of the Income Tax Code), which aims to prevent tax evasion or avoidance.

In 2016, the government adopted several specific additional anti-abuse rules, many of which resulted from recent developments in international tax law. Examples of these developments include:

  • the implementation of EU Directive 2015/121/EU on the common system of taxation applicable in the case of parent companies and subsidiaries of different EU member states (ie, the amended EU Parent-Subsidiary Directive (2011/96/EU)), which introduced anti-hybrid and general anti-avoidance rules;
  • the repeal of the patent income deduction regime, which was replaced by a new regime that is consistent with BEPS Action 5; and
  • the Anti-Tax Avoidance Directive, which contains provisions regarding the limitation of interest deduction, a general anti-abuse clause, exit taxation, controlled foreign company (CFC) rules and anti-hybrid mismatch rules. EU countries must implement the anti-tax avoidance provisions into their domestic tax laws by 1 January 2019.
Location savings

How are location savings and other location-specific attributes treated under the applicable transfer pricing rules? How are they treated by the tax authority in practice?

With regard to location savings, the BTA refers to the OECD Guidelines of 2017 (1.140-1.143 and 9.126-9.131).

Branches and permanent establishments

How are profits attributed to a branch or permanent establishment (PE)? Does the tax authority treat the branch or PE as a functionally separate enterprise and apply arm’s-length principles? If not, what other approach is applied?

With regard to profit allocation to PEs, ‘the authorised OECD approach’ is applied by the BTA. Profits are allocated to a PE as if it were a separate and independent enterprise that engages in similar activities under the same or similar conditions, taking into account the functions performed, assets used and risks assumed by the permanent establishment and other parts of the enterprise.

Exit charges

Are any exit charges imposed on restructurings? How are they determined?

Applying the arm’s-length principle to business restructurings, exit charges may apply. The question is whether a reorganisation involves either a transfer of something of value (an asset or an ongoing concern) or a termination or substantial renegotiation of existing arrangements, and whether that transfer, termination or substantial renegotiation would be compensated between independent parties in comparable circumstances.

Belgium introduced a deferred payment regime of five years for companies subject to exit taxes on EEA outbound cross-border transfers of assets or business, tax residence and restructurings.

Temporary exemptions and reductions

Are temporary special tax exemptions or rate reductions provided through government bodies such as local industrial development boards?

No.

Update and trends

Tax authority focus and BEPS

What are the current issues of note and trends relating to transfer pricing in your country? Are there particular areas on which the taxing authority is focused? Have there been any notable legislative, administrative, enforcement or judicial developments? In particular, how is the OECD’s project on base erosion and profit shifting affecting both policymakers and tax administrators?

Tax authority focus and BEPS41 What are the current issues of note and trends relating to transfer pricing in your country? How is the OECD’s project on base erosion and profit shifting affecting both policymakers and tax administrators?

Many of the recent developments concerning transfer pricing at the OECD and EU level have affected Belgian transfer pricing practice. Since Belgium adheres to the OECD, the Minister of Finance has stated that the recently updated chapters of the OECD guidelines (in particular, Chapter IV regarding intangibles) will be followed and applied to ongoing tax audits.

Belgium transposed the transfer pricing documentation and reporting requirements into domestic law in accordance with BEPS Action 13. In addition, following the introduction of EU Directive 2011/16/EU on administrative cooperation in the field of taxation (which repealed the EU Mutual Assistance Directive (77/799/EEC), the automatic exchange of tax rulings and BEPS Action 5), Belgium began spontaneously exchanging rulings with other EU member states. The latter directive requires EU member states to automatically exchange information on:

  • tax rulings (including all arrangements relating to transfer pricing and the allocation of profits to permanent establishments) issued on or after 1 January 2017; or
  • tax rulings issued, amended or renewed between 1 January 2012 and 31 December 2016, provided that certain conditions are met.

The information to be exchanged includes:

  • a description of the transactions covered;
  • the amount of the transactions covered;
  • the method and criteria used to determine the appropriate transfer pricing; and
  • the identification of other EU member states likely to be concerned.

In recent years, Belgium has witnessed a significant increase in the amount of transfer pricing audits by the BTA. The Minister of Finance has recently publicly emphasised the continuing importance of transfer pricing by pleading to further strengthen the TP Unit. The TP Unit has joined forces with the general regional centres within the BTA responsible for large enterprises.