BELGIUM Trends and Developments Contributed by: Aldo Engels, Emile Bauwens, Emma Parduyns and Vincenzo Vilardi, Loyens & Loeff
audit adjustments principle will be amended, so that it only applies in case of repeated offences for which a tax increase of at least 10% is effec - tively applied. Mere administrative inaccuracies should not be subject to this sanction. However, a limit to this principle will be implemented: any audit adjustments would only be offset with cur - rent year losses, and not with tax losses car - ried forward (the agreement does not mention any other current-year or carried-forward tax deductions), regardless of the application of a tax increase. Hence, any additional taxable basis imposed after a first offence in good faith shall (i) not lead to a tax increase, and (ii) be able to be offset against current-year losses, but not
taxable amount was assessed as the minimum tax base – even though no actual profit was real - ised – based solely on the notion of an “avoided capital loss” stemming from the intra-group transfer of a receivable at book value. Credit rating analysis to price intragroup debt In a recent ruling, the court of first instance of Brussels reviewed and assessed the credit rating of a Belgian company for determining the arm’s length interest rate under an intercompany loan provided by a Swiss related lender. The case sheds light on how the BTA and courts approach the credit rating determination process, making use of credit rating agencies’ established meth - odologies and considering the impact of implicit group support. The BTA claimed that the Belgian borrower should be considered “core entity” under the S&P Group Rating Methodology, as a result of which it should have the same credit rating as the group to which it belongs. The BTA con - cludes that the credit rating of the Belgian bor - rower was understated resulting in excessive interest payments to the Swiss lender. In this judgment, the court confirms that the BTA bears the burden of proof to demonstrate the validity of a transfer pricing adjustment. Earlier leading case law confirmed that the burden of proof is twofold: the BTA should demonstrate that (i) the method applied by the taxpayer does not lead to an arm’s length outcome (either because the method is inappropriate or was incorrectly applied), and (ii) another method pro - viding another price is appropriate. In the case at hand, the court concludes that the BTA suc - cessfully demonstrates that the taxpayer incor - rectly assessed the borrower’s creditworthiness but fails to establish an arm’s length interest rate
against carried-forward losses. Transfer pricing documentation
The coalition agreement states that the new gov - ernment will simplify transfer pricing documen - tation, more specifically for small-and medium sized enterprises. It is still unclear what this will
mean in practice. Recent Case Law
Abnormal or benevolent advantage received When a Belgian company receives an abnormal or benevolent advantage from a related entity, the amount of that benefit constitutes its mini - mum taxable base, against which no losses or other deductions can be offset. While this anti- abuse rule was originally intended to target profit shifting to loss-making entities, it is increasingly applied in the context of transfer pricing adjust - ments, even in the absence of any clear tax avoidance intent. A notable example is a recent judgment by the Antwerp Court of Appeal, which held that the sale of receivables at nominal value by a Belgian company to a Dutch group entity amounted to an abnormal or benevolent advan- tage, given the poor financial condition of the French related debtor. As a result, a significant
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