Worldwide transfer pricing reference guide 2014

Belgium
Taxing authority and tax law
Taxing authority: The taxing authority responsible for transfer pricing in Belgium is the Belgian Administration of Direct Taxes, which
is part of the Federal Public Service Finance. While transfer pricing issues can be raised in the course of an ordinary tax audit, a specific
transfer pricing audit team has been created within the Belgian tax authority. This highly specialized team, which significantly increased
in size recently, has nationwide authority, operates autonomously and selects its audit targets autonomously. In addition, it provides
support to other field inspectors, if requested.
Tax law and decrees: While no specific transfer pricing legislation exists in Belgium, the arm’s length principle was formally introduced
into Belgian tax law on 21 June 2004, by Article 185, §2 of the Belgian Income Tax Code (ITC) (entered into force on 19 July 2004).
This article’s wording is similar to that of Article 9, §1 and §2 of the OECD Model Tax Convention.
In addition, the ITC contains various provisions which directly or indirectly relate to transfer pricing. These provisions can be found in
Articles 26, 49, 54, 55, 79, 207, 344 and 345 of the Belgian ITC. These articles deal with the notion of abnormal and gratuitous benefits
(indirectly embodying the arm’s length principle), the deductibility of expenses and avoidance of the shifting of profits.
The general provisions of the Belgian ITC, for instance those regarding penalties, late interest payments, etc., also apply to transfer
pricing matters.
A general advance ruling practice (also covering APAs) was introduced on 24 December 2002 and came into effect on 1 January 2003.
The Royal Decree of 10 August 2009 requires Belgian companies to provide certain additional information regarding transfer pricing in
the notes/annex section of their statutory annual accounts.
The Law of 23 December 2009 introduced a reporting requirement (Article 307, §1, s. 3 ITC) and a related tax deduction denial for
payments to tax havens that are not reported, or that are lacking underlying bona fide business purposes (Article 198, 10° ITC).
The main characteristics of this reporting requirement can be summarized as follows. The reporting requirement applies to payments
of more than EUR100,000 per taxable period made by resident or non-resident entities (Belgian permanent establishments) to persons
established in tax havens on or after 1 January 2010, whereby tax havens are defined with reference to a “black list” determined
through a Royal Decree (it currently contains around 30 jurisdictions that either do not levy corporate income tax or have a nominal
corporate income tax rate that is lower than 10%). A mandatory form (n° 275 F) for reporting direct or indirect payments to persons
established in tax havens are available. Failure to report payments results in non-deductibility of such payments. In addition, these
deductions are applicable upon presentation of proof by the Belgian tax payer that these payments relate to actual and bona fide
arm’s length transactions with persons other than artificial constructions.
Relevant regulations and rulings
The tax administration has issued various guidelines on transfer pricing:
• Administrative guidelines on the offensive aspects of transfer pricing, issued in 1999
• Administrative guidelines on the defensive aspects of transfer pricing, issued in 2000 and 2003
• Administrative guidelines providing the tax authority’s view on the interpretation of Article 185, §2 ITC, introducing the arm’s length
principle into the Belgian tax law, issued in July 2006
• Administrative guidelines regarding the formal creation of a transfer pricing audit team within the tax authority, issued in July 2006
• Administrative guidelines on transfer pricing documentation, the transfer pricing code of conduct and transfer pricing audits,
issued in November 2006
Taking into account the specifics of each case, the rulings are provided on the basis of a general ruling practice (see APA opportunity,
below). APAs are provided on an individual basis and the Belgian government has furthermore implemented a regime which provides, for
tax purposes, a deduction on risk capital (i.e., qualifying equity), also known as a “notional interest deduction.”
In addition, the government introduced a special tax deduction equal to 80% of the income derived from the use of patents. As a result of
this deduction, income that is patent-related is subject to an effective tax rate of 6.8% or less.
OECD guidelines treatment
The tax authority indicates in its administrative guidelines that taxpayers should generally follow the guidance mentioned in the OECD
Worldwide transfer pricing reference guide
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