As we enter the second half of September, we inch closer to the corporate tax and transfer pricing compliance deadline for many Belgian taxpayers. While the tax return and transfer pricing compliance deadline has typically been somewhere at the end of September (i.e. for companies with financial years ending in December), in light of the current COVID-19 situation, the filing deadline for the Assessment Year 2020 (AY 2020) has been extended until 29 October 2020.
For the transfer pricing compliance, come end-October, companies meeting the respective thresholds will have to file their Local File forms (275LF) on the MyMinfin platform (in XML), similar to prior years. To clarify various aspects of the transfer pricing filings and requirements, the Belgian tax authorities published an additional Circular setting out another list of Frequently Asked Questions (FAQs) at the end of June 2020.
One of the key points covered in the FAQ is that the Belgian tax authorities expect a comparability and functional analysis performed in line with the Organisation for Economic Co-operation and Development’s (OECD) Action 13 requirements to be maintained at the time of filing the Local File form. Consequently, in order for a taxpayer to indicate that a “transfer pricing study” is available (under Section B10 of the Local File form), the Local File report (per Action 13) – or at least the key aspects of such documentation, comprising of the functional analysis and comparability analysis – should have been prepared. Prior to the publication of the FAQ, some taxpayers had interpreted “transfer pricing study” to mean the (sole) availability of comparability/benchmarking studies. This is an aspect that taxpayers should certainly review when completing the Local File form for FY 2019 (AY 2020).
The FAQ also clarifies the following aspects, among others:
As a response to the economic situation resulting from the COVID-19 pandemic, a loss carry-back regime has been introduced in Belgium. The regime stipulates that companies in a taxpaying position in FY 2019, but expecting a loss in FY 2020, may be able to apply the loss carry-back which is intended to allow companies to get a quicker refund of tax prepayments or to pay less taxes for AY 2020.
Consequently, groups that may be considering a review of their transfer pricing policies in FY 2020 will need to consider whether and how the loss carryback regime will impact the Belgian taxable base. Examples include:
It is safe to say that between now and the end of October, Belgian taxpayers will need to consider various aspects ahead of the corporate tax/transfer pricing compliance deadline. Please reach out to us for further insights.