By a Program Law of 1 July 2016, Belgium introduced transfer pricing documentation requirements in line with the minimum standard imposed by OECD BEPS Action 13. We refer to our tax alert of 6 July 2016 for more information hereon.
The above law requires the filing of a Master File, Local File and CountrybyCountry Report (CbCR) for those Belgian taxpayers which meet certain thresholds. By means of three different Royal Decrees which were published in the Belgian State Gazette of 2 December 2016, the Belgian government now provides the forms to be used for these filings. On the same day, also an explanatory memorandum was published with respect to these forms. The explanatory memorandum also provides for the notification form through which Belgian enterprises are to inform the tax authorities about the group company that will file the CbCR. In addition thereto, the memorandum provides for some filing deadline extensions.
The form with respect to the Master File (form 275 MF) is fully in line with Annex I to Chapter V of the BEPS Action 13 Report and lists the different items on which information is to be provided to the Belgian tax authorities; i.e. organizational structure, description of the business, intangibles of the multinational enterprise, intercompany financial activities and the multinational enterprise's financial and tax positions. This information can be provided through PDF attachments to the form.
The explanatory memorandum provides for a more detailed list of information that should be provided. This list is again fully in line with Annex I to Chapter V of the BEPS Action 13 Report.
The Master File needs to be filed for reporting periods or accounting years that start on or after 1 January 2016 and such within 1 year after the end thereof.
The Local File exists of a form with general information on the enterprise and a more detailed information sheet per business unit (form 275 LF) which must be filed by Belgian group entities of multinational enterprises that meet certain thresholds.
The form exists of different boxes in which the general and detailed information needs to be filled out. Optionally, the company can also attach certain PDF files with further information and benchmarking studies. Although strongly recommended, it is still not required to have such benchmarking studies. The attachments cannot replace the information that is required to be filled out in the different boxes of the form.
The general information to be provided includes a description of the management structure of the Belgian company, an overview of its direct parent companies and direct subsidiaries, the activities and reporting structure of the Belgian company and an overview of its main competitors. It also covers information regarding the ultimate parent company and the business restructurings in which the company was involved during the relevant reporting period.
The detailed information to be provided per business unit includes a description of the nature of the activities of the business unit, financial information regarding transactions with related and unrelated parties over the last three years, information regarding cross border intercompany product sales, transfers of fixed assets, service transactions, financial transactions and other intercompany transactions and the transfer pricing method used to determine the intercompany prices for these transactions. The explanatory memorandum clarifies that a materiality threshold of EUR 25,000 per transaction can be applied with respect to the aforementioned cross border transactions. Also specific details regarding intercompany financing and cash pools need to be provided. Finally, information regarding the transfer pricing methodologies applied and whether or not a transfer pricing study is available, information on the profit attribution to possible permanent establishments and an overview of cost contribution agreements, advance pricing agreements and captive reinsurances needs to be provided.
Important to note is also that the explanatory memorandum provides contrary to what was previously foreseen that the detailed information sheet per business unit must only be filed for reporting periods or accounting years which start on or after 1 January 2017. The general information sheet is still required to be filed for reporting periods or accounting years which start on or after 1 January 2016 and must be filed together with the Belgian tax return for this period.
Country by Country Report
The form which was published with respect to CbCR by Belgian companies (form 275 CBC) is fully in line with the form included in the BEPS Action 13 Report.
The explanatory memorandum provides for some additional guidance as to how the CbCR must be completed:
- Facts related to a permanent establishment must be reported for the jurisdiction in which such permanent establishment is established and should not be included in the information reported at the level of the head office;
- The same information sources should be used on a consistent basis to compile the CbCR. The group can use consolidated accounts, stand alone financial statements or internal reports to collect the requested financial data. In case statutory accounts are used, all information must be converted to the same currency at the average exchange rate. No adjustments must be made for GAAP differences;
- The information sources used as well as any change thereto must be described;
- The revenue amounts to be reported do not included any dividends received;
- Profit (loss) before tax includes also extraordinary income and expenses;
- The income tax paid (on cash basis) includes all income taxes paid by the relevant entities, both in their home jurisdictions and abroad (e.g. withholding taxes). Also the advance tax payments that may have been made must be reported here.
- Under "income tax accrued current year", all income taxes accounted for with respect to the result of the relevant period must be reported. Deferred taxes or accruals for uncertain tax liabilities may not be included in this line.
- The stated capital to be reported by permanent establishments is the paid up capital of the legal entity to which they belong unless there are certain regulatory equity requirements at the level of the establishment.
- Accumulated earnings of permanent establishments must be reported by the legal entity to which they belong.
- Under additional information, the taxpayer must in any event include which information sources are used to compile the CbCR, possible exchange rates used and a further description of non defined business activities.
The CbCR must be filed for all reporting periods or accounting years which start on or after 1 January 2016 and such within a period of one year.
Notification regarding CbCR filing
Pursuant to the Law of 1 July 2016, Belgian group companies need to notify the Belgian tax administration which entity of their group will file for CbCR and such before the end of the relevant reporting period (i.e. by 31 December 2016 for reporting periods starting on 1 January 2016). Provided there is appropriate exchange of information, the Belgian tax authorities will in principle also accept voluntary CbCR filings made abroad.
The explanatory memorandum now provides for as specific notification form (form 275 CBC NOT) which must be filed through email at BEPS13@minfin.fed.be or regular mail at a central address. The memorandum also provides for an extension of the filing deadline till 30 September 2017.