Belgium

  1. In your jurisdiction, what are the legal bases for eliminating double taxation further to a transfer pricing reassessment (European Arbitration Convention, mutual agreement procedures provided for by tax treaties)? In addition to the procedures set forth by such tax treaties, is there any other (formal or informal) domestic procedure in your jurisdiction?
  2. In addition – as the case may be – to the European Arbitration Convention, did your jurisdiction sign tax treaties with other States including an arbitration procedure? If yes, can you give the list of such States?
  3. In your experience, in your jurisdiction, how long does it take generally to eliminate the double taxation under the European Arbitration Convention and/or mutual agreement procedures set forth by tax treaties (and/or the domestic procedure if it exists)?
  4. In your jurisdiction, what are the starting point and time limit to initiate a procedure to eliminate double taxation resulting from a transfer pricing reassessment?
  5. If a reassessment is issued by your tax authorities, which State must receive the application for the international procedure to eliminate double taxation 1 The terms “international procedure to eliminate double taxation” mean the European Arbitration Convention or a mutual agreement procedure set forth by a tax treaty. (your State? the other State concerned? both States?)
  6. What are the formal conditions to initiate an international procedure to eliminate double taxation? Is there a list of documents to provide? To which department of the tax authorities (name, address) must the request be sent?
  7. In which cases would the competent authority of your jurisdiction refuse to engage/participate to the international procedure to eliminate double taxation?
  8. Is tax collection suspended during the procedure?
  9. Assuming the procedure results in an agreement on a way to cancel double taxation, how is generally such agreement implemented in your jurisdiction?
  10. In your jurisdiction, is it possible to engage concomitantly an international procedure to eliminate double taxation and litigation in front of courts? If yes, is it necessary at some stage to abandon the litigation in order to conclude/finalize the international procedure?
  11. Any other interesting aspect not addressed above?

Multiple procedures to eliminate double taxation are available in the Belgian jurisdiction; their legal basis is laid down in 1 the European Arbitration Convention (96/436/EEC), 2) the tax treaties concluded by Belgium and 3) the Belgian Income Tax Code.

  1. Belgium is a party to the European Arbitration Convention, which is directly applicable under Belgian law. Administrative guidelines on application of the European Arbitration Convention are provided within Circular Letter nr. AFZ/Intern IB/98-0170 dd. 7 July 2000 (as amended by Circular Letter nr. AFZ/Intern. IB/98-0170 dd. 25 March 2003).
  2. Mutual agreement procedure (hereinafter “MAP”): most tax treaties concluded by Belgium provide a MAP in line with the OECD Model Tax Convention.
  3. Belgian internal legislation provides two procedures to remedy/eliminate double taxation unilaterally: the appeal procedure and the ex officio procedure;
    • The appeal procedure is available only in case a tax assessment notice is issued by the Belgian tax authorities towards a Belgian taxpayer. The procedure has to be initiated within six months as from the third working day following the day on which the assessment notice was sent to the Belgian taxpayer.
    • The ex officio procedure has to be initiated within five years as from the 1st of January of the year in which the tax leading to double taxation was assessed. The procedure is not available insofar the concerned assessments have already been subject to a Belgian administrative appeal procedure in which a final decision was rendered.

2. In addition – as the case may be – to the European Arbitration Convention, did your jurisdiction sign tax treaties with other States including an arbitration procedure? If yes, can you give the list of such States?

Double Taxation Treaties (hereinafter “DTT”) concluded by Belgium with the USA and the UK include an arbitration clause.

3. In your experience, in your jurisdiction, how long does it take generally to eliminate the double taxation under the European Arbitration Convention and/or mutual agreement procedures set forth by tax treaties (and/or the domestic procedure if it exists)?

In our experience, the MAP procedure can take one to three years, whereas the ex officio procedure generally takes three to six months.

With regard to the appeal procedure, the Belgian tax authorities are strictly speaking not bound by a deadline to render a decision, but in general a decision is rendered within six months. In case no decision is rendered within six months, the appeal can be brought before the court.

4. In your jurisdiction, what are the starting point and time limit to initiate a procedure to eliminate double taxation resulting from a transfer pricing reassessment?

The starting point for a procedure to eliminate double taxation will be the assessment notice sent to the taxpayer by the tax authorities.

In general, it is recommended to contact the tax authorities that have issued the assessment notice in order to have an informal discussion, as soon as possible after reception of that assessment notice. If these informal contacts demonstrate that no informal settlement can be reached, the appeal procedure is to be initiated (obviously within the applicable deadline of six months as from the third working day following the day on which the assessment notice was sent to the Belgian taxpayer). The MAP can only be initiated after the appeal deadline of six months has expired. The MAP can however be initiated even when the ex officio procedure deadline of five years has not yet expired.

5. If a reassessment is issued by your tax authorities, which State must receive the application for the international procedure to eliminate double taxation 1 The terms “international procedure to eliminate double taxation” mean the European Arbitration Convention or a mutual agreement procedure set forth by a tax treaty. (your State? the other State concerned? both States?)

According to the procedure as provided within the European Arbitration Convention, the State of residence of the taxpayer that has been reassessed, or the State in which its permanent establishment to which the taxable income is accountable is situated must receive the application for the procedure.

With regard to the MAP, most Belgian DTTs provide that the taxpayer is to present its case to the competent authority of the contracting state of which it is a resident. Exceptionally, e.g. within the tax treaty concluded with the USA, the taxpayer may present its case to the competent authority of the contracting state of its choice.

6. What are the formal conditions to initiate an international procedure to eliminate double taxation? Is there a list of documents to provide? To which department of the tax authorities (name, address) must the request be sent?

The procedure as provided by the applicable DTT or the European Arbitration Convention has to be initiated according to the formalities as described by Circular Letter nr. AFZ/Intern IB/98-0170 dd. 7 July 2000 (as amended by Circular Letter nr. AFZ/Intern. IB/98-0170 dd. 25 March 2003).

The written request is to provide all necessary information on the taxpayer and the assessment(s), describing the double (taxation) that has occurred in contradiction to the applicable DTT. It is to include a description of the factual circumstances, and of the applicable Belgian and foreign tax legislation, together with legal arguments opposing the double taxation.

In general, the written request is to be filed within three years as from notification of the assessment notice. It should be filed in the French or Dutch language. It is to be addressed to the competent authority (regional director of the relevant tax assessment office) with copy to the director of International Relations within the General Administrations of Taxes, North Galaxy Building, Koning Albert II-laan 33 bus 22, 1030 Brussels, Belgium). Some DTTs provide specific deadlines for the filing of the request. For example, the DTTs with Canada, Greece, Italy and Portugal provide that the request has to be filed within two years as from the notification.

7. In which cases would the competent authority of your jurisdiction refuse to engage/participate to the international procedure to eliminate double taxation?

The Belgian tax authorities will refuse to engage in a procedure when the concerned tax assessment does not result from a “matter as described within article 4 of the European Arbitration Convention”. No explicit definition of ‘transfer pricing’ or ‘transfer pricing dispute’ is provided.

In case of a final decision or judgment after an administrative or judicial procedure demonstrating that the taxpayer is liable to “serious penalties”, the Belgian tax authorities are entitled to refuse to handle the procedure.

For the term ‘serious penalty’, reference is made to the European Arbitration Convention; “a criminal or administrative penalty in cases, either of a common law offence committed with the aim of tax evasion, or infringements of the provisions of the Belgian Income Tax Code or of decisions taken in implementation thereof, committed with fraudulent intention or with the intention of causing injury”.

According to our experience, are generally regarded as a ‘serious penalty’ in Belgium, the criminal penalties imposed in application of articles 449-451 of the Belgian Income Tax Code.

8. Is tax collection suspended during the procedure?

According to Belgian law, tax collection is suspended as long as no final decision has been taken on the disputed tax assessment, unless the tax authorities’ rights are at stake. In case of an international procedure based on the European Arbitration Convention or the applicable DTT, the tax authorities will generally uphold that their rights are at stake, so that tax collection is not suspended.

In case tax collection is indeed suspended, late payment interest will in principle apply at the rate of 7% per annum.

In general, no similar restrictions exist for the MAP as provided by the DTT concluded by Belgium.

9. Assuming the procedure results in an agreement on a way to cancel double taxation, how is generally such agreement implemented in your jurisdiction?

If an agreement is reached to cancel double taxation, the regional tax assessment office will generally reassess each year separately. Late payment interest are due at the rate of 7% per annum, unless the agreement decides otherwise.

A transfer pricing reassessment should not give rise to withholding tax.

10.In your jurisdiction, is it possible to engage concomitantly an international procedure to eliminate double taxation and litigation in front of courts? If yes, is it necessary at some stage to abandon the litigation in order to conclude/finalize the international procedure?

The international procedure as provided by the European Arbitration Convention can be initiated even when a case is filed with a Belgian court.

As long as no final judgment has been rendered, the States concerned can still engage an international procedure to reach an agreement, but no advisory commission as referred to in article 7 (1) of the European Arbitration Convention can however be set up.

11. Any other interesting aspect not addressed above?

Some interesting figures/statistics provided by the Belgian tax authorities:

  • Open MAP cases end 2013: 24, of which eight older than two years;
  • Open MAP cases end 2014: 36, of which 11 older than two years;
  • Written requests refused in 2013: 1;
  • Written requests refused in 2014: 0.

Authors

Picture of Olivier Querinjean
Olivier Querinjean
Member of the Tax group
Picture of Arnout Vaninbrouckx
Arnout Vaninbroukx