Worldwide transfer pricing reference guide 2014

Belgium (continued)
OECD guidelines treatment (continued)
Guidelines. Although there has been no direct communication with regards to the acceptability of the 2010 version of the OECD
Guidelines. However, these are generally accepted by the Belgian tax authorities.
Priorities/pricing methods
Although taxpayers are, in principle, free to choose any OECD transfer pricing method as long as the method chosen results in
arm’s length pricing for the transaction, conceptually, transaction-based methods are preferred over profit-based methods.
Taxpayers are not required to use more than one method, although they should be able to support their decision to apply a particular
method.
Transfer pricing penalties
The general tax penalty framework applies to transfer pricing adjustments. These penalties vary from 10% to 200% (in exceptional cases)
of the additional tax. The rate depends on the degree of intent to avoid tax or the degree of the company’s gross negligence.
Furthermore, for late payments, interest is due on additional tax assessments (including assessments resulting from a transfer pricing
adjustment).
Penalty relief
Since additional tax assessments depend on the degree of intent to avoid taxes or on the company’s gross negligence, penalties can be
reduced or eliminated if the taxpayer can demonstrate its intent to establish transfer prices in accordance with the arm’s length principle
(e.g., through its documentation efforts).
Documentation requirements
No legislative guidance regarding the nature and content of proper transfer pricing documentation exists in Belgium. However, the 1999
administrative guidelines state that documentation should demonstrate that the taxpayer’s pricing complies with the arm’s length
principle to avoid an in-depth transfer pricing audit. The 1999 guidelines recommend that documentation include, at a minimum:
• Activities of the group, including competitive position, level of market, economic circumstances, business strategies, etc
• Identification and characterization of intercompany transactions and contractual relationships among affiliates
• Functional analysis, including an overview of the functions, risks and intangibles
• Economic analysis sections regarding the transfer pricing methods used
The 2006 administrative guidelines on transfer pricing confirm Belgium’s agreement with the principles outlined in the EU Code
of Conduct. Therefore, the information expected in this Code of Conduct should also be considered from a Belgian transfer pricing
documentation perspective. In order to encourage companies to ensure that transfer pricing documentation is maintained, these
administrative guidelines refer to the concept of a prudent business manager. Although the burden of proof lies with the tax
authority, to allow the tax authority to verify the company’s tax position, the taxpayer needs to provide information on its transfer
pricing policies applied.
Documentation deadlines
Given the absence of any formal transfer pricing documentation requirements, there is no statutory deadline for the preparation of
transfer pricing documentation. However, upon a tax audit, the taxpayer has a period of one month to provide all information requested
(including all information that allows verification of its taxable income and thus, the arm’s length nature of the transfer prices).
It is therefore recommended that each transaction is required to be documented as executed. For valid reasons, the one month period
can be extended.
Additionally, the 1999 guidelines provide that if the taxpayer can demonstrate upon a tax audit that it has made sufficient efforts to
prepare transfer pricing documentation; the tax inspector does not need to carry out an in-depth tax audit.
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