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Belgium’s Transfer Pricing Regulations

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Thresholds for Filing Transfer Pricing Documentation

To determine if a company needs to file transfer pricing documentation in Belgium, consider the following thresholds:

• €50 million operational and financial income
• Balance sheet total of €1 billion
• 100 Full-Time Equivalent (FTE) employees

Transfer Pricing Documentation Requirements

Belgian tax authorities require companies that meet the thresholds to file two types of documentation:

Master File: Form 275MF

• Contains information on:
  • Organizational structure
  • Business description
  • Intangibles
  • Intercompany financial activities
  • Financial and tax positions

Local File: Form 275LF

• Has two parts:
  1. Information about the local entity
  2. Detailed information sheet for transfer pricing analysis of transactions between the local entity and foreign group entities

Risk Factors for Challenge

The following factors may increase the risk of a transfer pricing challenge by Belgian tax authorities:

• Persistent losses
• Losses in a ’low risk’ entity
• Licensing payments to low tax jurisdictions
• Financial transactions
• Management fees
• Transactions with tax haven entities when no or little economic value is added

Penalties

Companies that fail to comply with transfer pricing regulations may face penalties, including:

• Tax penalties: 10% to 200% of unpaid taxes on income not declared
• Interest on penalties and late payment interest on total amount of taxes

Transfer Pricing Methods

Belgian tax authorities prefer the use of the Comparable Uncontrolled Price method (CUP). Other methods, such as:

• Pan-European benchmarks, are accepted for documentation purposes.
• Median within the interquartile range can be considered arm’s length.
• No ‘secret comparables’ or published TP ‘safe harbours’ are allowed.

Advance Pricing Agreements (APAs)

Belgian tax authorities offer APAs to taxpayers with intercompany transactions. These agreements:

• Are available to any taxpayer
• Can be unilateral, bilateral, or multilateral
• Cover up to 5 years
• Have the option for rollbacks in bilateral and multilateral APAs

Exemptions

Companies that do not meet the threshold requirements are exempt from filing transfer pricing documentation.

Related Developments

Belgian tax authorities have:

• Increased transfer pricing audits
• Appointed specialized tax inspectors to focus on intragroup transactions, including those with smaller international groups.