BELGIUM Law and Practice Contributed by: Aldo Engels, Emile Bauwens, Emma Parduyns and Vincenzo Vilardi, Loyens & Loeff
Other than the obligations described in 8.2 Transfer Pricing Documentation , no formal obligations are imposed by Belgian law to sup - port the arm’s length character of intercompany transactions. The burden of proof for perform - ing a transfer pricing correction lies with the BTA. Nevertheless, in practice it is highly rec - ommended to have supporting transfer pricing documentation for material intra-group transac - tions in place to mitigate the risk of discussions in this respect. In the case of an incomplete or incorrect tax return (including a transfer pricing correction upon an audit), the tax due on the income por - tion corresponding to the upwards adjustment shall be augmented by a tax increase between 10% (first infringement, unless waived in specific circumstances if good faith can be proven) and 200%. To prove the good faith of the taxpayer, availing of transfer pricing documentation can be very useful. Furthermore, an administrative fine of between EUR50 and EUR1,250 may be imposed. The additional tax vested will not trig - ger late payment interest. If a tax increase of at least 10% is applied, no deduction of current year losses and carry-forward tax attributes can be made on the amount of the upwards adjust - ment as a result of a tax audit (eg, carry-forward tax losses, but excluding dividends received during the same taxable period). Hence, the amount of the correction will be the minimum taxable base (the so-called “cash tax for audit adjustments” principle). This rule does not apply where the BTA waives the application of the tax increase of at least 10% in the case of good faith. This automatic sanction mechanism will be abol - ished by the new Belgian federal government, in light of the “right to make an honest mistake” . A first offence would no longer be sanctioned by a
tax increase. The cash tax for audit adjustments principle will be amended and will only apply in case of repeated offences for which a tax increase of at least 10% is effectively applied. However, a limit to this principle would be imple - mented: any audit adjustment could only be off - set with current year losses and not with carried forward tax losses, regardless of the application of a tax increase. Please refer to 13.1 Options and Requirements in Transfer Pricing Controversies . 8.2 Transfer Pricing Documentation From financial year 2016, Belgian legislation requires a taxpayer to file a country-by-country report, a master file and a local file if certain thresholds are met, as follows. • Country-by-country report – multinational enterprise groups which, for the reporting period immediately preceding the last closed reporting period, report a total consolidated revenue of at least EUR750 million in their consolidated financial statements. • Master file and local file – any Belgian group entity which, for the financial year imme - diately preceding the last closed financial year, exceeds one of the following criteria, as reflected in its standalone statutory annual accounts: (a) a total of EUR50 million in operating and financial income, excluding non-recurring income; (b) a balance sheet total of EUR1 billion; or (c) an annual average headcount of 100 full- time equivalents. Belgium has introduced updated transfer pric - ing documentation requirements with respect to the master file and local file, which will apply
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