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Wednesday, 26 February 2020

Belgian tax administration releases Circular Letter “Transfer Pricing”

The Belgian tax administration published the Circular Letter “Transfer Pricing” (Circular Letter 2020/C/35). This document is the final version of the Circular Letter following the draft Circular Letter that was initially published on 9 November 2018, to which stakeholders were invited to submit comments (in two rounds, respective deadlines of December 2018 and June 2019).

T/A economics was one of the stakeholders that provided extensive detailed feedback (click here for our initial comments in Dutch) and was part of subsequent discussions with the Belgian tax administration regarding the feedback received.

Dutch and a French version of the Circular Letter are available at the following websites:, respectively

The Circular Letter confirms that the Belgian tax administration adheres to the 2017 OECD Transfer Pricing Guidelines, but also includes the interpretations and preferences of the Belgian tax administration as regards various transfer pricing topics.

One key takeaway we can already provide concerns the crucial topic of the Circular Letter’s entry into force. As a retro-active implementation of the latest version of the OECD TP Guidelines (i.e. application of the 2017 OECD TP Guidelines to fiscal years prior to the issuance of this report in its final form as approved by the OECD Council) was heavily debated, the Circular Letter now stipulates that it is only applicable for intercompany transactions as of 1 January 2018. However, certain paragraphs - that, in general, concern the interpretation of the Belgian tax administration, or a Belgian-specific consideration - will only enter into force as from 1 January 2020. Nevertheless, we note that some of our concerns regarding the retro-active effect of certain other paragraphs that in our view deviate from the 2017 OECD TP Guidelines, and hence constitute an interpretation, still remain in place – most notably paragraphs 16 (Belgium-specific and opinion), 17 (opinion), 21 (opinion), 38 (Belgium-specific), 59 (Belgium-specific and opinion), 68 (policy), 89 (opinion impacting burden of proof), 107 (policy line putting an incremental burden on reviewing comparables for source of loss) and 125 (opinion).

In conclusion, we wish to note that retroactivity as such is based on strict principles (confirmed by the case law of the Belgian Constitutional Court) in case of legislation. However, royal/ministerial decree’s and Circular Letter’s cannot be applied in a retro-active way, under penalty of the infringement of the principles of good administration. Therefore, taxpayers may consider developing procedural as well as economic argumentation when reference is made to this Circular Letter by the tax administration in their advantage.

On the other hand, we appreciate that the Circular Letter confirms that Advance Decisions that have been granted before the issuance of the Circular Letter are not subject to review in retrospect following the viewpoints stated in this Circular Letter.   

Another key takeaway is that although we are happy to see that several of our comments and suggestions (most notably of the first round of commentary) were considered for the final version of the Circular Letter, we are, nevertheless, disappointed as several of our fundamental inputs provided in the second round were not taken into account. These inputs relate to fundamental discrepancies between the (literal) reading of the 2017 OECD TP Guidelines and the final Circular Letter – most notably in relation to the first chapter, including the basic translation of the arm’s length principle itself that contains a discrepancy (the Circular Letter refers to ‘transactions’ rather than to ‘relations’ as article 9 of the OECD Model Tax Convention does so).

As final key takeaway, we note that, in the Circular Letter, the Belgian tax administration has opted to include a specific chapter X on financial transactions referring to the recently published OECD report on this matter (OECD (February 2020), Transfer Pricing Guidance on Financial Transactions: Inclusive Framework on BEPS Action 4, 8-10) which is to be considered as a new chapter in the OECD TP Guidelines. This chapter X of the Circular Letter is said to be only entering into force as from 1 January 2020 notwithstanding the OECD report was only published formally in February 2020 (see our earlier thoughts on retroactivity). On this topic we will provide you with further commentary in the coming weeks (together with our practical commentary on the OECD work on the subject matter). As a hint of direction, our comments on the (draft) non-consensus document of the OECD, which has been subject to (many) public comments in due course of 2018, are available here. In respect of the Circular Letter itself, we may already note that in our opinion paragraph 267 - on a cash pooling transaction being short term and a measurement of structural positions being 12 months - is a prime example of where a wrong definition of the arm’s length principle (cf. our above) may lead to. A cash pool transaction may be a short-term transaction indeed, a cash pool arrangement may constitute a longer term relation, and therefore there should not be a mechanical measurement of the structural nature of a cash pool but rather an assessment of the specific facts and circumstances and options realistically available to all parties concerned in a more holistic manner.

One may ask – as a final remark – whether the taxpayer has to hold his horses when the Circular Letter has entered into force and applies to his situation. Indeed, a Circular Letter is only binding for the tax authorities, not for the taxpayer. So the taxpayer is not obliged to follow the Circular Letter, and certainly not if the Circular Letter seems to be contra legem, or wrongly interprets the OECD TP Guidelines (being soft law itself…).

In case you would have questions with respect to this Circular Letter, do not hesitate to contact us.

Andy Neuteleers - Partner T/A economics (

Ben Van Vlierden - Partner Tiberghien Lawyers – (

Ellen Vandingenen - Senior Associate Tiberghien Lawyers – (

Ben Plessers - Sr. Manager T/A economics – (

Heleen Van Baelen - Sr. Manager T/A economics – (

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