| Tax Authority:
Administration of Direct Taxes
| Statutory Law / Regulations / Guidelines:
While no specific transfer pricing legislation exists in Belgium, the arm’s length principle was introduced in Articles 185, §2,and 235 of the Income Tax Code. General tax law on avoidance of profit shifting also applies (Articles 26, 49, 54, 55, 56, 79, 207, and 344 of Income Tax Code). In June 1999, initial administrative guidelines were issued on transfer pricing. The 1999 guidelines are broadly based on the OECD Guidelines. In November 2006, the Belgian tax authority issued administrative guidance on transfer pricing audits and documentation.
| Scope of Transfer Pricing Regulations:
Article 185 rules are applicable to legally associated companies. However, the profit shifting rules under article 26 are very broadly applied and can apply to non-related parties that are “interdependent”. The interdependent criteria applies not only to legal control but also to management control.
| Reference to OECD Guidelines:
Belgium follows the OECD Guidelines. Circular letter of June 28,1999 and Parliamentary memorandum accompanying the Law of June 21, 2004 introducing Article 185, §2, BITC in domestic law make reference to the OECD Guidelines.
| Methods & Comparables:
Belgium accepts the five methods specified in the OECD Guidelines. The most appropriate method rule applies. Subject to the availability of reliable comparable data, traditional transaction methods are preferred in practice to profit-based methods. The Belgian tax authorities allow the use of pan-European comparables.
| Documentation Requirements:
There is no statutory requirement to prepare contemporaneous documentation in Belgium. However, lack of documentation can expose the taxpayer to significant penalties in an audit context.
| Audit Risk:
The risk of transfer pricing being examined in the course of a tax audit is medium. The 2006 administrative guidelines urge companies to have a pre-audit meeting with the tax authority to:
(i) Discuss the transfer pricing policy carried out within a group;
(ii) Discuss the level of transfer pricing documentation already available; and
(iii) Avoid having irrelevant questions raised, which may require taxpayers to prepare an unreasonable amount of work.
| Transfer Pricing Adjustments:
Statute of limitations on assessment for transfer pricing adjustments is generally three years from the end of the tax year.
| Interest & Penalties:
Non-deductible expenses or penalties may be charged in respect of any increased assessment. In addition, tax increases in the range of 10 to 50 percent of the increased tax can be imposed. Assessment must be paid within two months after the notification is sent. Interest for late payment is due as well. If a taxpayer files a tax protest, special rules are applicable in payment of tax and interest.
| Advanced Pricing Agreements:
APAs are available under Law of 21.06.2004 introducing new ruling regime and (in the case of bilateral APAs) under MAP of applicable double tax treaty.
| Competent Authority:
Belgium follows the mutual agreement procedure under the relevant income tax treaty and the competent authority procedure is used in Belgium.
| Link to OECD Country Profile
| Link to Relevant Government Sites |