Belgium: Reminder of transfer pricing deadlines; reducing audit risk
Belgium: Reminder of transfer pricing deadlines
Taxpayers need to be aware of the transfer pricing documentation requirements and the applicable deadlines in advance of the transfer pricing compliance season.
The transfer pricing reports filed by taxpayers may suggest which ones will be selected for a transfer pricing audit. However, there may be certain steps that taxpayers can take to reduce the audit risk.
Transfer pricing deadlines
Belgian taxpayers have an obligation to prepare and file the following forms if certain thresholds are met (pursuant to Belgian tax law that is in turn based on the OECD’s BEPS Action 13):
- Local file (275 LF)—the Local file form is to be filed at the same time as the corporate income tax return. The deadline for the corporate income tax returns regarding FY 2019 (31 December closure) is extended from 24 September 2020 to 29 October 2020 (this additional period also applies to all returns that must be submitted between 24 September 2020 and 29 October 2020).
- Master file (275 MF)—the Master file form must be filed no later than 12 months after the last day of the reporting fiscal year of the multinational entity (MNE) group—i.e., for FY 2019 generally being 31 December 2020.
- Country-by-country (CbC) report (275 CBC)—the deadline for filing the CbC report is the same as for the Master file form.
- CbC reporting notification (275 CBC NOT)—for periods ending on 31 December 2019 or later, Belgian constituent entities of an MNE group are no longer required to file the notification annually if the information already filed in previous CbC reporting notifications remains the same. When there are changes to the details of the CbC reporting entity, the CbC reporting notification will still need to be filed in Belgium by the last day of the MNE group's financial year—i.e., for FY 2020 generally being 31 December 2020.
In view of these upcoming transfer pricing compliance deadlines, there are certain issues that taxpayers may need to consider.
- Since last year, the Local file form (275 LF) has become one of the key sources for the Belgian tax authorities in defining which companies will undergo a transfer pricing audit. Proper completion of the form is therefore essential. There may be certain actions to mitigate this selection risk.
- It will be essential for taxpayers to review on a yearly basis their existing intercompany pricing policy, to assess whether the policy is still in line with the new guidance from the OECD and that of the Belgian tax administration. Read TaxNewsFlash. For example, the Belgian transfer pricing circular letter (dated 25 February 2020 and then updated in June 2020) refers to two effective dates—depending on the paragraphs involved, the effective date will be for transactions as from 1 January 2018 or for transactions as from 1 January 2020.
- Taxpayers need to consider updating or renewing their transfer pricing benchmarking studies—the Belgian administration believes that an update of the benchmark study is to be conducted every three years (but the specific facts and circumstances could even necessitate a more frequent revision). This is also confirmed in the transfer pricing circular letter, last updated in June 2020.
- The OECD’s final report (published February 2020) on transfer pricing aspects of intercompany financing includes a significant number of far-reaching statements that may affect current transfer pricing policies. It therefore will be prudent for taxpayers to review their existing intercompany financing policies, to assess whether they are still in line with the new guidance from the OECD and from the Belgian tax administration.
- With regard to the hard-to-value intangibles, a number of new insights are provided by the Belgian tax administration. For example, it is assumed that there is always an information asymmetry between the taxpayer and the tax authorities. For this reason, the Belgian tax administration may consider ex-post outcomes as presumptive evidence of the appropriateness of ex-ante pricing arrangements.
- Always be prepared for the tax authorities to come “knocking on the door”—the Belgian tax authorities invest more time and people in transfer pricing audits every year; thus, no company can consider itself immune to a possible audit.
- The COVID-19 crisis will have a significant impact on the transfer pricing policy of companies for financial year 2020 (for which the transfer pricing documentation requirements are due in 2021).
Read a September 2020 report prepared by the KPMG member firm in Belgium
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