The Belgian tax authorities have decided to take the tax audits of multinational groups to the next level. From now on, the Belgian tax inspectors will mainly focus on transfer pricing and complex international tax issues (resulting from, among others, the implementation of the Anti-Tax Avoidance Directive, “ATAD”).
As the Belgian tax authorities are flooded with transfer pricing information and documentation following the rather recent requirement for qualifying taxpayers to file a Master File, a Local File (Form), and Country-by-Country Reports (and notifications), they have decided to invest considerably in manpower to review all these documents (hereby assisted by software tools) and to perform audits on the detected issues. In doing so, a three-layered approach will be followed.
First of all, the Special Transfer Pricing Audit Department will increase its number of transfer pricing inspectors from 27 to 42.
Secondly, in enhancing cooperation with the Large Companies Department, the specialists of the Special Transfer Pricing Audit Department will organize transfer pricing trainings for the audit centres of the Large Companies Department. To date, full-week trainings have already been conducted twice, and this training program will continue. In total, more than 200 people from the Large Companies Department (of which more than 100 are inspectors) will be trained. Each of the 20 teams of the Large Companies Department will be assigned a number of (multinational) groups of companies that will be subject to a thorough transfer pricing and international tax audit. During these audits, the teams of the Large Companies Department will be assisted and supported by the specialists of the Special Transfer Pricing Audit Department. Consequently, the teams of the Large Companies Department of the Belgian tax authorities will focus on transfer pricing and international tax issues when auditing large groups and companies.
In addition, the Special Investigation Squad (Bijzondere Belastinginspectie - BBI/Inspection Spéciale des Impôts – ISI) has concluded a protocol with the Special Transfer Pricing Audit Department, whereby BBI/ISI will also focus more on transfer pricing issues, hereby coordinating and liaising with the Special Transfer Pricing Audit Department.
At the beginning of February 2018, the Special Transfer Pricing Audit Department will, as they have done in the years before, send out its standard transfer pricing questionnaire or request for information to a few hundred taxpayers. This is expected to be the last time that this approach will be followed, as for subsequent years, the Belgian tax authorities will use the information contained in the Master File, the Local File (Form), and the Country-by-Country Reports to select groups and companies for transfer pricing audits. The selection will still be driven by a data mining tool — the “mantra data warehouse” software – applying risk analyses. Declining profits, business restructurings, losses, etc will identify a taxpayer as a potential target for a transfer pricing audit.
During the transfer pricing audit, all intercompany transactions will be audited but the delineation of transactions, procurement arrangements, intangibles, and captives will receive particular attention this year.
Following the above described three-layered approach, a considerable number of (multinational) groups will undergo a thorough transfer pricing and international tax (in particular, with respect to ATAD-topics) audit in the coming years.
Furthermore, the Belgian tax authorities will become increasingly involved in multilateral (joint) transfer pricing audits – particularly with the tax authorities in the Netherlands and Austria, with whom there already appears to be regular interaction.