Belgium: Transfer pricing audits, new round of information requests

Belgium: Transfer pricing audits, information requests

A number of Belgian taxpayers this week received a transfer pricing request for information from the tax authority’s special transfer pricing audit department.

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The request for information (Vraag om inlichtingen in Dutch and Demande de renseignements in French) reflects the tax authority’s use of two different information requests:

  • A “classic” information request containing a list of 33 questions related to the company’s overall business, intra-group transactions, functions, risks, and assets
  • A new, short information request with a list of specific questions (for example, related to intra-group financing and withholding taxes)

Taxpayers are being allowed one month to reply to the information request (subject to an extension if requested). Taxpayers also may be afforded an opportunity to request a pre-audit meeting (in order to fine tune the scope of the audit) if the taxpayer applies for the meeting within 10 days of receipt of the information request.

Possible COVID-19 implications

Although most requests cover 2018 and 2019, taxpayers may also expect that difficult transfer pricing issues covering 2020 will arise as a result of the coronavirus (COVID-19) pandemic. In this respect, the OECD published on 18 December 2020 guidance on the transfer pricing implications of the COVID-19 pandemic. Read TaxNewsFlash

The OECD guidance encourages tax administrations to be aware of certain COVID-19-related complexities when performing risk assessments, evaluating transfer pricing positions on audits, and considering the support and documentation demonstrating reasonable efforts and care by taxpayers in trying to comply with the arm’s length principle. More specifically, the OECD report provides transfer pricing guidance about:

  • Comparability analysis
  • Losses and allocation of COVID-19 specific costs
  • Government assistance program
  • Advance pricing arrangements

KPMG observation

To avoid multiple visits by the Belgian transfer pricing inspectors and to avoid the surprise of considerable transfer pricing adjustments at the end of the audit, taxpayers need to consider what strategy to follow in reacting to the questionnaire. Also there may be little time to safeguard certain rights—for example, to request a pre-audit meeting.
 

Read a January 2021 report prepared by the KPMG member firm in Belgium

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