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Tuesday, 14 June 2016

Belgium’s imminent statutory transfer pricing documentation requirements

The T/A economics team headed by A. Neuteleers

On 6 June 2016, a new law1 was proposed in the Belgian Federal Parliament’s Chamber of Representatives to introduce, amongst other items, a statutory transfer pricing documentation requirement for certain undertakings in Belgium, which would take effect from the accounting years starting on or after 1 January 2016.

Essentially, in accordance with this legislative proposal, and aligned with the OECD’s BEPS outcome of October 2015, a 3-tier approach isproposed including:

• Country-by-Country Reporting (CBCR);
• Masterfile; and
• Local file.

We refer to our previous article2 on the future of transfer pricing documentation for a concise overview of how the OECD’s BEPS-style transfer pricing documentation differs from previous practice. In this article, we highlight the most salient features of the proposed new law.


Whereas, according to the OECD report, compliance with CBCR requirements is only intended for multinational enterprises with consolidated revenues of EUR 750 million or more, the proposed new law introduces this requirement for multinational groups with gross consolidated revenues of EUR 750 million or more, comprised of gross operating revenues, gross financial revenues and gross extra-ordinary revenues. Nowhere in the Action 13 OECD BEPS report, as far as we can read, are consolidated revenues defined as gross revenues, and we can only assume that with the notion ‘gross’ in fact ‘before cost’ is intended, and not ‘before, for instance, discounts in case of operating revenues’. Overall, the rest of the CBCR requirements seem to be in line with the OECD’s guidance.


The content of the Masterfile, as set out in the proposed new law, seems to be in line with the OECD’s suggested requirements. The statutory requirement to prepare such a Masterfile, for Belgian group entities (as well as Belgian permanent establishments of foreign head offices), starts from the moment one of the following thresholds is surpassed (unconsolidated):

• Operating and financial revenues of EUR 50 million (therefore, excluding extraordinary revenues); or
• Total balance sheet size of EUR 1 billion; or
• Annual average full time equivalents of 100.

Furthermore, the proposed new law specifically requires that the Masterfile must be submitted to the Belgian tax administration by means of a form, although this form and its means of submission are still to be set out in a Royal Decree. Nevertheless, the proposed new law makes clear that Belgian group entities that need to comply with the requirement will need to submit the Masterfile no later than 12 months after the financial year-end.

Local File

Basically, the same thresholds as for the Masterfile compliance requirement apply for the Local File. Also, for the Local File, the content will be set out in a form, whose content will be governed by Royal Decree later; but it should be noted that, under the proposed law, the content will consist of two major parts: (i) information on the local entity, and (ii) a detailed information form. The latter form is said to concern the intragroup transactions between the local entity and its foreign affiliates, and will include, in particular, financial data, comparability analyses, and a selection of the most appropriate transfer pricing method. The requirement for completing the latter part, i.e. the detailed information form, will only apply when at least one business segment of the Belgian group entity has cross-border intragroup transactions exceeding EUR 1 million in total. 

Our comments

In view of these legislative proposals, in particular regarding the Local File, and on the basis of the draft forms that are available today, the Belgian tax administration is seeking to utilise the introduction of the Belgian statutory transfer pricing documentation requirement to de facto retain all detailed information that it has previously gathered in transfer pricing audits (over 10 pages of detailed tables to fill in)3,  and in an electronic format, that enable it to perform advanced datamining techniques on such information. 

This requirement will not only significantly increase the administrative burden for internationally-active taxpayers in Belgium, but, importantly in our opinion, creates a real risk concerning the vast amount of data to be analysed and, moreover, the appropriateness of the tax administration’s interpretation.

Undoubtedly, the data will be used for internal comparison purposes - i.e. sector-driven margin comparisons. When this technique limits itself to audit selection there may not be an issue, but potentially such data analysis will be followed with tentative one-size-fits-all conclusions. We strongly believe that the appropriateness of a transfer pricing policy cannot be captured in tables. There just is not the room for the correct amount of ‘story-telling’ (or it will be ignored as one of the attachments to the forms); this is most notably one of the key changes to the OECD Transfer Pricing Guidelines as Mr. Andrew Hickman, Head of the OECD’s transfer pricing unit, has publicly stated at various times over the last months. As such, the Belgian Local File proposal, as it unofficially reads in its current table format, would completely miss the essential new features underpinning the ‘arm’s length’ principle following Actions 8 to 10 of the OECD BEPS project and the newly-reviewed chapters of the OECD Transfer Pricing Guidelines.

We can only hope that the Belgian government and its advisers decide to only follow the OECD’s recommendation concerning the Local File and not to increase the administrative burden on taxpayers in Belgium as well as not to believe that transfer pricing is such an exact science that it is susceptible of being captured in data tables. If additional data is required for audit selection, then it should be requested in a very restricted manner and for material business issues only.

For more information, please contact:
The T/A economics* team headed by Andy Neuteleers - T/A economics partner

*T/A economics is an independent economist boutique specialized in transfer pricing and valuations, that has entered into a network arrangement with Tiberghien. The views expressed in the above article remain that of T/A economics and its authors.

3 The Federation of Enterprises in Belgium quite accurately regrets the depth and width of the requirements as ‘gold plating’ (


The T/A economics team headed by A. Neuteleers

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