BELGIUM Law and Practice Contributed by: Aldo Engels, Emile Bauwens, Emma Parduyns and Vincenzo Vilardi, Loyens & Loeff
• include non-distributed specific types of passive income in the taxable basis of the controlling taxpayer (Model A); or • include non-distributed income arising from non-genuine arrangements which have been put in place for the essential purpose of obtaining a tax advantage (Model B). Model B implied that CFC income could only be taxed in Belgium if it is attributable to the “signifi - cant people” functions carried out by the Belgian controlling taxpayer (assessment based on the arm’s length principle). By switching to Model A, the Belgian legislature disconnects the CFC- assessment from the arm’s length principle. 1.2 Current Regime and Recent Changes Years before the Belgian codification of the inter - nationally accepted arm’s length principle in Arti - cle 185 Section 2, ITC (in 2004), the BTA tradi - tionally applied Articles 26, 79 and 206/3 ITC as a legal basis for performing transfer pricing corrections based on the principle of “abnormal or benevolent advantages” . Although this notion was based on the arm’s length principle, Bel - gian case law traditionally applied a more sub - jective approach to the notion of “abnormal or benevolent advantages” , accepting that provid - ing assistance to group entities in financial dif - ficulties may under certain conditions not trigger the granting of an abnormal advantage. By tak - ing the group relationship into account, Belgian case law went further than the “separate entity approach” followed by the OECD in the applica - tion of the internationally accepted arm’s length standard. Article 185 Section 2 ITC was introduced in 2004 to facilitate the interpretation of the notion of “abnormal or benevolent advantage” and thus to increase legal certainty for taxpayers. At the
time, this provision was only applicable via tax rulings or mutual agreement procedures. Following BEPS Action 13, Belgium introduced transfer pricing documentation obligations from 1 January 2016. Depending on certain thresh - olds, Belgian taxpayers are obliged to submit a country-by-country report (or notification), a master file and a local file with the BTA. In addition to “non-public” CbCR obligations, the Law of 8 January 2024 amended the Bel - gian Code of Companies and Associations with respect to the disclosure of income tax informa - tion by certain companies (implementing EUR Directive 2021/2101 and commonly referred to as “public CbCR” ). This legislation requires com - panies that are part of MNE groups with a total consolidated turnover of more than EUR750 mil - lion in each of the last two consecutive financial years to publicly disclose information regarding the income taxes paid and other tax-related matters, such as a breakdown of profits, rev - enues and employees per country. The public CbCR applies to financial years starting on or after 22 June 2024. For most Belgian entities, this implies that the new requirements will apply for the financial year starting 1 January 2025. 2. Definition of Control/Related Parties 2.1 Application of Transfer Pricing Rules Article 26 ITC provides that when a Belgian com - pany grants an abnormal or benevolent advan - tage to a non-Belgian company or establishment with which the Belgian taxpayer has “direct or indirect relationship of interdependence” , the advantage should be included in the Belgian taxpayer’s taxable basis. The notion of “direct or indirect relationship of interdependence” has
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