BELGIUM Trends and Developments Contributed by: Aldo Engels, Emile Bauwens, Emma Parduyns and Vincenzo Vilardi, Loyens & Loeff
the total amount the BTA seeks to recover has quadrupled compared to 2023. Unlike previous circulars, the TP Circular does not provide specific indications regarding the cases in which transfer pricing audits are most likely. Companies are typically selected through an internal data mining process based on a risk assessment analysis, the indicators of which remain confidential. Nevertheless, we under - stand the probability of becoming subject to an audit notably increases in case of declining or volatile results, structural loss-making positions, high debt-to-equity ratios, the presence of a per - manent establishment, the involvement in busi- ness restructurings, and payments to low-tax jurisdictions. Next to this, non-compliance with TP documentation obligations is considered in the selection process. Information request and pre-audit meeting A transfer pricing audit typically begins with a standard broad questionnaire consisting of around 30 questions regarding among others the Belgian company’s organisational structure, supply chain, segmented P&Ls per business units, functional and risk profile, financial trans - actions, and transactions involving intangibles. A recently observed trend is that the transfer pric - ing unit of the BTA sometimes opts for a more
customised questionnaire based on available information or immediately sends a request for a so-called pre-audit meeting. Such a meeting allows the BTA to gain initial insights into how the Belgian company operates within the group and its applied transfer pricing policy. Even upon receipt of a questionnaire, the taxpayer can usu - ally request a pre-audit meeting before respond - ing in writing, which allows for discussing the questions orally and delineating the parameters of the audit. Focus on certain topics during audit It can be observed that certain topics are fre - quently and thoroughly investigated during audits. For instance, the BTA tend to carefully review among others the reconciliation of the transfer pricing policy with the annual accounts, the alignment of the applied TP model with the functional profile. the origin of losses, the alloca - tion of synergies related to procurement activi - ties, the DEMPE functions in relation to IP, the arm’s length nature of intra-group service fees, including the cost base in a cost-plus remunera - tion, etc. Moreover, the BTA particularly focuses on financial transactions – eg, the applied inter - est rate to remunerate intercompany debt, the arm’s length character of a company’s intra - group debt level, as well as the arm’s length character of cash pool arrangements.
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