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Introduction of Belgian transfer pricing rules in Belgian tax law

This article was written by Delphine Vanassche, Carl Van Biervliet.
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Introduction of Belgian transfer pricing rules in Belgian tax law
Following elaboration of BEPS Action Point 13, the Belgian legislator has included the mandatory transfer pricing documentation in the bill of June 2th 2016 for the Programme Act. The documentation requirement is threefold, consisting of a country-by-country report, a group file (master file) and a local file.

The country-by-country report (CBC report) should provide an overview of the distribution of group revenue, group profits, paid income tax, income tax to be paid and other economic factors, as well as an overview of the main activities of the group. It is mandatory for the parent entity (or surrogate parent entity) to prepare a country-by-country report if, on a consolidated basis, the group has gross revenue in excess of EUR 750 million. The country-by-country report must be submitted within 12 months following closing of the consolidated financial statements of the group.

The master file and the local file are mandatory as soon as one of the following criteria have been exceeded (evaluated on the basis of the individual financial statements of the Belgian entity - company or permanent establishment - for the previous financial year):

- a total of EUR 50 million in operating and financial income, excluding non-recurring income;
- total assets of EUR 1 billion;
- an annual average workforce of 100 full-time equivalents

The group file (master file) must contain an overview of the multinational group, including the nature of the business, intangible assets, intra-group financial transactions, the consolidated financial and fiscal position of the multinational group, its entire business policy and its global allocation of income and economic activities. The arrangements for submitting the master file are still to be defined by means of a Royal Decree.

The local file consists of two parts: a general form, containing information about the nature of the activity of the Belgian entity as well as an overview of the related transactions. In addition, there is also an information document with which information can be provided on the related transactions for each business unit of the Belgian entity, as well as a detailed transfer pricing analysis of the business unit. This second part is only required if at least one of the business units within the Belgian group entity exceeds the threshold of one million euros for cross-border transactions with group entities in the previous financial year. In that case, the information document must be completed for each business unit that exceeds this threshold.

The draft text can be submitted electronically together with the Belgian tax return. The report must be written in English. However, a translation of the report in one of the official languages can be requested during an audit.

Please note, qualifying entities that do not comply with their reporting and compliance obligations may be given an administrative fine ranging between € 1,250 and € 25,000.

The bill anticipates that the reporting obligation will come into force from fiscal year 2017. For companies with fiscal years beginning on January 1st 2016 or later, this reporting requirement already applies.

Update: In the meantime the Programme Act has been approved on June 30th 2016.

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