Transfer pricing documentation obligations in Belgium

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BDO Belgium recently initiated a data mining project to identify Belgian entities or permanent establishments of a multinational group that would potentially fall under certain transfer pricing documentation obligations that apply in Belgium.

Your company was selected by our system based on the publicly available annual accounts for the financial year preceding the most recently (to be) closed reporting period, whereby it was detected that one of the undermentioned three thresholds was exceeded.

Consequently, your company may be required to prepare and submit – this year – a Master File Form 275-MF and a Local Form 275-LF for the most recently (to be) closed reporting period. Note that not adhering to these requirements may give rise to administrative penalties and potentially increases the risk of being selected for a (possible) tax/transfer pricing audit.

If you wish to receive more information regarding the transfer pricing documentation in Belgium and what obligations your company potentially needs to fulfil, please fill out the following form so one of our experts can contact you and draw up an overview of our services and corresponding budgets.

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Why should I document the transfer pricing policy within my company?

We would like to inform you that it is recommended to properly document the applied transfer pricing policy within your company. This documentation will aid your organisation to:

  • Substantiate the intercompany pricing within (the group of) your company;

  • Maximise its tax position in a legal manner;

  • Serve as the first line of defence in the event of an audit.

General framework of Belgian legislation

Like many other countries, Belgium has enacted specific transfer pricing documentation requirements into its tax law (Programme Law of 1 July 2016) for financial years starting on or after 1 January 2016. These requirements are based on the Action 13 of the OECD /G20 ‘BEPS’ (Base Erosion and Profit Shifting ) Project and introduced a three-tier documentation approach consisting of a Country-by-Country report, Master File and a Local File.

Master File and Local File

What?

According to the transfer pricing documentation requirements in Belgium, Belgian entities or permanent establishments of a multinational group that satisfy one of the following thresholds need to submit a Master File (through Form 275-MF) and a Local File (through Form 275-LF) to the Belgian tax authorities:

(to be assessed on the basis of the stand-alone financial statements of the Belgian entity concerned – company or permanent establishment – for the preceding financial year)

  • A total of EUR 50 million of operating and financial income, excluding non-recurring income;
  • A balance sheet total of EUR 1 billion; or
  • An annual average workforce of 100 full-time equivalents.

The Master File (Form 275-MF) focuses on qualitative data and must contain an overview of the multinational group to which the Belgian entity – company or permanent establishment – belongs, comprising information such as

  • the organisational structure;
  • the nature of the group’s business activities;
  • a description of the value creation of the group entities;
  • the intangible assets of the group;
  • the intra group financial transactions and general transfer pricing policy (especially as regards intra group services provision);
  • etc.

The Local File (Form 275-LF) focuses on quantitative data and consists of the following two parts:

PART I: a general part containing information on the local entity, including:

  • the management and organisational structure;
  • the business activities;
  • competitors;
  • etc.

Part I must in principle be completed by all companies meeting at least one of the abovementioned thresholds.

PART II: a detailed part containing more detailed (numerical) information and requires:

  • a description of the related cross-border intercompany transactions involving the local entity and its associated foreign group entities;
  • the relevant financial information of these transactions;
  • the selection and application of the transfer pricing method;
  • the availability of transfer pricing studies, intercompany contracts, and benchmark studies;
  • etc.

When?

The Master File (Form 275-MF) will have to be filed with the Belgian tax authorities within a period of 12 months after the closing of the reporting period of the group.

The Local File (Form 275-LF) must be submitted within the same period as the corporate income tax return or non-resident company tax return for the reporting period in question.

How?

Both the Master File (Form 275-MF) and Local File (Form 275-LF) should be submitted electronically via the tax authorities’ MyMinfinPro website in a required XML format.

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