Transfer pricing documentation requirements in Belgium

1. In your jurisdiction, are taxpayers obliged to maintain transfer pricing documentation? Does this obligation apply to all taxpayers, or only to certain categories (e.g. taxpayers with turnover or assets exceeding a particular threshold)?

All Belgian taxpayers which are part of an international group of companies have to maintain transfer pricing documentation.

2. What is the content of the documentation that must be prepared?

a) Which transactions must be documented (all transactions with associated enterprises, or only those which exceed a particular threshold)?

All transactions with associated companies have to be documented and their price must be justified at all times.

b) What is the definition of “associated enterprises” for the purposes of this requirement?

In accordance with the Belgian company code, “associated companies” are:

  • (A) any company which has control of another (based on share ownership, voting power, power to appoint the majority of the members of board),
  • (B) any company which is controlled by another,
  • (C) companies which are part of a consortium,
  • (D) other companies which are controlled by the companies mentioned above on (A), (B) and (C).

c) For EU countries, is the content of the documentation similar to that described in the EU Code of Conduct on transfer pricing documentation for associated enterprises (“EU TPD”)? If not, are taxpayers entitled to choose between the local requirements and the EU TPD?

The tax authorities have published a circular relating to transfer pricing documentation which transposes the content of EUTPD. However, this circular also states that the European documentation is only a minimum requirement for companies and does not prevent complementary information being requested (depending on the facts and the circumstances). This might be:

  • information concerning the company (activities, structure, shareholding, sales, turnover, and transactions with associated companies …),
  • information concerning the transactions (market, conditions, circumstances, framework …),
  • information concerning the functions of the company (production, marketing, advertising, transport, management …),
  • information concerning the risks (financial, loan conditions, liability, and change in prices …),
  • information concerning the assets (tangible or intangible).

d) Do taxpayers which are not established in your jurisdiction need to undertake to provide any specific information upon request? Can your tax authorities require the taxpayer in your jurisdiction to provide information which is located in another state?

The Belgian tax authorities may request information only from Belgian taxpayers. Such requested information could include information which comes from another State.

Regarding taxpayers which are not established in Belgium, the Belgian tax authorities could request assistance from the tax authorities of the foreign jurisdiction in obtaining information.

e) If comparable studies are to be provided, do the tax authorities generally accept regional benchmark studies (e.g. pan-European benchmark studies)?

In practice, regional benchmark studies and in particular pan-European benchmark studies are generally accepted by the Belgian tax authorities.

f) What language(s) are to be used by taxpayers in submitting the transfer pricing documentation?

The languages which are used in Belgium are French, Dutch or German depending on the location of the registered seat / establishment of the company.

However, given the international aspects of the transfer pricing issues, the Belgian tax authorities also accept transfer pricing documentation in English.

3. What is the deadline or timescale for providing transfer pricing documentation to the tax authorities (is it to be provided for example upon filing of the tax returns, at the beginning of a tax audit, or on the specific request of the tax authorities)?

As a rule, taxpayers have to provide the transfer pricing documentation upon specific request from the tax authorities (generally made in the context of a tax audit) within a period of one month. However, due to the importance of the documentation to be provided, the tax authorities will generally agree to extend the deadline for providing the information to three months from the request.

If the required information is not provided, the tax authorities could adjust the taxpayer’s taxable basis on the grounds that the transaction does not comply with the “arm’s length principle”. In addition, tax on the non-reported portion of income could be increased through penalties of 10% to 200%, depending on the nature and seriousness of the taxpayer’s infringement. Finally, administrative fines ranging in amount from EUR 50 to EUR 1,250 could also be applied for each violation of the provisions of the Belgian income tax code.

5. Does the absence or incompleteness of documentation reverse the burden of the proof as regards the arm’s length character of the transactions?

As indicated above, if the required information is not provided, the tax authorities could adjust the taxpayer’s taxable basis; the taxpayer will then have to demonstrate based on supporting evidence / documentation that the transaction complies with the “arm’s length principle” and that the tax authorities may not adjust its taxable basis. This does indeed imply a reversal of the burden of proof.

Neither the reassessment of the taxable basis, nor the application of the penalties, prevents the taxpayer from engaging a mutual agreement procedure provided for by a double tax treaty or by any international treaty.

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Olivier Querinjean
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