Belgian tax official reveals details on new transfer pricing documentation requirements and BEPS plans

In a BEPS seminar organised by the Federation of Enterprises in Belgium this week, with a special focus on the practical consequences for Belgian enterprises, a representative of the Belgian Ministry of Finance, Steven Van Elsuwe;, provided more details on the new legislative proposals that have been prepared so far, and on the different options that are currently under review.

Although it was explicitly mentioned that the views presented are still subject to change, and do not represent an official position of the Belgian government, some interesting observations can already be made from the outset.

Overall, Belgium is clearly committed to implementing the minimum standards on transfer pricing documentation and CbC reporting, and to signing the multilateral convention for implementation in January 2016.

Belgium will largely follow the OECD although some deviations are foreseen

In general, current thinking is to follow to a large extent, the OECD BEPS package on related matters.

However, there will most likely be some deviations, in particular, in respect of the Local File.

No specific details were mentioned during the presentation, but since the specialised Belgian transfer pricing audit cell utilises a standard questionnaire for initiating TP audits, on which basis they assess to further request detailed information on selected topics or transactions, there is a strong possibility that certain items, which appear in the standard questionnaire but are not mentioned in the OECD Master File and Local File information list, will be added.

For instance, in last year’s audit cycle, they specifically requested – as a means of testing the relevance of the topic – whether there were captive insurance agreements in place. Hence, the Belgian tax administration is considering specific information that might be useful from a Belgian-specific perspective.
Another likely deviation is that they are considering introducing the definition of what constitutes a “Belgian Group Entity” into the legislation, whereby this definition would refer to Belgian companies and permanent establishments that have to comply with the Belgian Accounting Law of 17 July 1975.

Furthermore, they seem to be of the opinion that Belgium’s general confidentiality safeguards would be sufficient, and that accordingly no specific confidentiality legislation for received CbC reports is required.

Finally, Belgium is unlikely to include CbC reporting in Belgian Tax Law, but will likely opt to refer to the purpose in a Memorandum of Understanding.

Implementation and other pending items

Legislation, therefore, is in the making, and will probably be introduced at the beginning of 2016, however, likely with effect on financial years that start on or after 1 January 2016.

Along with the considerations above, the Belgian government is also addressing other implementation decisions to be made.

Most notably, in view of thresholds, for the CbC Reporting requirement, Belgium will follow the OECD threshold of €750 million ($830 million) in consolidated revenues. In accordance with a review of the ministry of finance, this would mean that some 60 Belgian “ultimate parents” would need to produce and file their CbC Report in Belgium.

In view of introducing a statutory transfer pricing documentation requirement into Belgian tax law, including the OECD Master File and Belgian-specific Local File approach, the tax administration is looking into the following options (taking into consideration what other countries decide):

• A threshold on the basis of consolidated revenues
• A threshold on the basis of the Belgian definition of what constitutes a small and medium-sized enterprise; or
• A threshold on the basis of the intra-group transaction volumes.

Furthermore, they are looking into what information would be required under a secondary filing obligation in Belgium, and which sanctions are to be imposed for non-compliance.

Use of CbC reports received

Belgium could be a sizeable net recipient of CbC Reports produced and filed abroad.

However, given the deadlines of first submitting the CbC Reports centrally (one year) and the time that the foreign tax administrations have to make the reports available to Belgium (initially six months, later three months), in combination with the general Belgian Statute of Limitations (three years), it does not leave plenty of time to perform a thorough risk analysis, initiate and successfully complete audits, if CbC Reports would be used for “annual” assessments.

Van Elsuwé accordingly noted that the value of the information received will lie in the ability to analyse consistency over several years.