BELGIUM Law and Practice Contributed by: Aldo Engels, Emile Bauwens, Emma Parduyns and Vincenzo Vilardi, Loyens & Loeff
14.2 Significant Court Rulings The following recent cases are of particular rel - evance for Belgian transfer pricing practice. Ghent Court of Appeal, 8 June 2021, No 2016/AR/455 (“Uniclic”) This case concerned the arm’s length character of a royalty-free licensing arrangement between a domestic manufacturing company acting as a licensee of patented technology (in the flooring industry) owned by a foreign related company located in Luxembourg. The BTA considered that the Belgian entity performed certain functions and managed certain risks in relation to the for - eign company’s licensing activity and thus con - tributed to the foreign company’s profits result - ing from the exploitation of the patents without receiving any remuneration. The BTA claimed, with reference to a functional analysis, that the Belgian domestic company performed all DEMPE functions (ie, develop - ment, enhancement, maintenance, protection, exploitation) in respect of the patents and also managed all important risks. Accordingly, by applying Article 26 ITC, the BTA included a sig - nificant part of the foreign company’s profits in the domestic company’s taxable base. The court ruled against the BTA, making several interesting statements with respect to: • the burden of proof (ie, on the BTA); • the working in time and the value of the OECD Guidelines (ie, mere recommendations which in principle cannot be applied with retroactive effect – see 9.1 Alignment and Differences ); and • clarifications regarding the allocation of DEMPE functions.
Antwerp Court of Appeal, 20 June 2017, No 2015/AR/2583 (“Philip Morris International”) This case dealt with the valuation of shares sold by a Belgian company to a Dutch related com - pany. The BTA considered that the valuation of shares based on a discounted cash flow (DCF) method was too low and thus resulted in the Belgian seller granting an abnormal advantage to its Dutch parent company. The BTA used an alternative valuation method based on which the BTA arrived at a higher valuation. The court recognised that the BTA did not ques - tion the appropriateness of the DCF method as such, but merely that the discount rate used would be too high (and consequently lead to a lower price). The court ruled that the BTA did not prove that the discount rate used would be incorrect or arbitrary and concluded that when several valuation methods are available, the BTA cannot conclude that an abnormal or benevolent advantage is granted when it appears that the method applied by the taxpayer is appropriate and was correctly applied, even if an alterna - tive valuation leads to a different result. In other words, the mere fact that the BTA arrives at a different price by applying a different method does not prove that an applied price is abnormal. Antwerp Court of Appeal, 5 March 2019, No 2017/AR/1640 (“Opel”) This case dealt with the remuneration method of a Belgian entity acting as a manufacturer of cars sold to a German related entity. Here, the BTA argued that the profit split method used to distribute profits between the Belgian entity and the German related company was inappropriate as the Belgian entity had to be classified as a contract manufacturer acting on behalf of the German principal, and should therefore be enti - tled to a cost-plus remuneration (rather than a
71
CHAMBERS.COM
Powered by FlippingBook