Belgium: Year-end transfer pricing considerations

The KPMG member firm in Belgium prepared a December 2022 report discussing various year-end transfer pricing considerations for taxpayers. 

Many multinational enterprises determine their transfer prices based on forecasted budget figures, and may or may not make transfer pricing adjustments periodically throughout the year. Year-end adjustments are often necessary to close the gap between actual results and the group’s defined transfer pricing policy. As the Belgian tax authorities rely on the statutory accounts in assessing the transfer prices of companies, it is critical that these year-end adjustments are implemented timely and before the closure of the accounts. The potential implications of making such year-end adjustments on customs duties and indirect taxes also need to be considered.

In Belgium, taxpayers can apply for a unilateral ruling with the Ruling Commission to obtain certainty on transfer pricing issues. A unilateral ruling has to be requested in writing, and has to be in advance (i.e., ahead of the filing of the corporate tax return for that given financial year). The Ruling Commission has stated in the past that prefiling or ruling requests should be submitted at least eight months before the filing of the corporate tax return for the companies that do not maintain the accounts per calendar year. Depending on the financial year end of companies, there might still be an opportunity to file such unilateral ruling requests as soon as possible.

The law of 20 November 2022 introduced in Belgium defined significant changes to the investigation, assessment and retention periods in the field of direct taxes (including transfer pricing). The assessment period has been extended to a period of six years (previously three years, in the absence of fraud) for so-called “semi-complex tax returns.” Tax returns of Belgian taxpayers obliged to submit a Local file/Master file or country-by-country (CbC) report are considered to fall under this category. The retention period for accounting and tax-related documentation has consequently also been prolonged from seven to ten years.

As observed in prior years, the new year will see the launch of a new round of transfer pricing audits, when selected Belgian taxpayers will be notified of a transfer pricing audit. The transfer pricing audit department within the Belgian tax authority, together with units of the Large Companies Audit Department and of the Special Investigation Squad, typically initiates the audit procedure by sending transfer pricing-related requests for information (RFI in English, Vraag om inlichtingen in Dutch and Demande de renseignements in French) to the Belgian taxpayer selected for an audit, which could either be in a standard or tailored format. Upon receipt, the taxpayer would have to respond within 30 days.

In recent years, the number of staff within the transfer pricing audit department has expanded, resulting in an increased capacity to conduct in-depth audits. It will therefore be crucial for companies to be prepared by ensuring that the relevant transfer pricing data, analysis, and documentation are readily available for such discussions with the Belgian tax authorities in the event of an audit. 

As the financial year-end approaches, it also means that the deadline for the Master file form (MFF) and CbC report and notification is approaching for Belgian taxpayers that are part of a multinational group with a 31 December financial year-end.

• The Master file form (275MF) is due within 12 months after the last day of the reporting period of the multinational group—meaning that for Belgian entities of groups with a 31 December financial year-end, the Master file form for FY 2021 will need to be submitted by 31 December 2022.
• The obligation to file a CbC report (275CBC) in Belgium applies to Belgian headquartered companies (or Belgian constituent entities in cases where local filing is required) where the group consolidated turnover for the preceding year exceeds the threshold of €750 million. The deadline to file the report is the same as the deadline of the Master file form, being 12 months after the last day of the reporting period of the multinational group (i.e., 31 December 2022 for FY 2021 if the latter ends on 31 December).
• Each Belgian constituent entity which is part of a multinational group that is obliged to file a CbC report, will need to file a CBC notification with the Belgian tax authorities by the last day of the reporting period of the group. For reporting periods ending on 31 December 2022, Belgian constituent entities will need to file the CBC notification by 31 December 2022. Note that a CBC notification is only required if there are changes to be made to the information submitted in the last CBC notification filed.