Tax: News on Transfer Pricing Documentation

1. Belgian Transfer Pricing Forms: Amended as from January 2025

The Royal Decrees of 16 June 2024 (replacing the Royal Decrees of 28 October 2016) amend transfer pricing reporting rules (Dutch/French). Amendments will be in application for financial years beginning on or after 1 January 2025.

Background

By Royal Decrees of 28 October 2016, Belgium introduced the three-tier mandatory transfer pricing reporting structure composed of three forms:

1. a Master File form (275.MF);
2. a Local File form (275.LF); and
3. a Country-by-country report (275.CBC) or notification form (275.CBC.NOT).

As a reminder, Belgian entities/branches of multinational groups must file Master File and Local File forms when one of the following thresholds is exceeded (during the previous financial year):

• Total operating and financial revenues of EUR 50 million (excluding non-recurring items);
• Balance sheet total of EUR 1 billion; or
• Average annual number of employees of 100 in full-time equivalents.

Additionally, Belgian entities/branches of multinational groups with a consolidated gross revenue of at least EUR 750 million must file Country-by-country report or notification form.

In January 2022, the OECD has published a new version of its guidelines on "hard to value intangibles" and transfer pricing of financial transactions. This new publication and the tax authorities' experience led to the following amendments.

Master File form (275.MF)

The Master File contains standardized information that is relevant for all group members. As such, its aim is to provide the tax administration with more information on the group's organizational structure, its businesses, intangibles, inter-company financial activities and financial and tax positions.

This File now requires more explanations as to various items:

• Description of business activities: a more detailed analysis of the value chain and functional analysis of the group, going beyond the OECD guidelines (Box II);
• Intangible assets: a comprehensive description of DEMPE functions, along with a detailed list of intangible assets, specifying the legal owner and the entities performing DEMPE functions (Box III); and
• Financial transactions: the taxpayer must provide more details about the financial transactions (e.g. commercial or financial relationships, determining market conditions for treasury activities, and analyzing financial guarantees and in-house (re)insurance) (Box IV).

Local File form (275.LF)

The Local File specifically refers to material transactions of the local entity and consists of two parts, i.e. one part including general information on the company's structure and activities and a second part with detailed transactional data for each business unit (exceeding a certain threshold).

This form has slightly been amended.

Part B now requires taxpayers with cross-border intercompany transactions exceeding EUR 1 million to report transaction volumes per country, rather than aggregately.

In box B10, a tick-the-box requirement has been added for taxpayers with available transfer pricing methodologies, framework agreements, model contracts, or transfer pricing studies, which must now be included as readable PDFs.

Additional information must also be provided, including the tax identification numbers of relevant entities (A6 for main competitors and B11 for foreign permanent establishments of the Belgian entity) and a list of countries involved in cost contribution agreements, APAs, rulings, and in-house (re)insurance policies.

Country-by-Country notification form (275.CBC.NOT)

The Country-by-country report or notification form includes certain information relating to the group's overall distribution of income and taxes, as well as certain indicators of location and economic activity within the group.

The form should now indicate whether it is a first notification, an amendment to a previous notification, or a termination of the notification form. The notification form is also required in case of termination of the notification obligation.

2. Country-by-Country Reporting soon to become "public"

Background

Besides the aforementioned non-public reporting obligations, Belgium has also introduced public Country-by-Country Reporting ("public CbCR") through the law of 8 January 2024 amending the Belgian Code of Companies and Associations with respect to the disclosure of income tax information by certain undertakings and branches (Dutch/ French) ("Law"), and as further set out in the Royal Decree of 18 April 2024 (Dutch/French).

This new reporting legislation implements the EU Directive 2021/2101 as regards disclosure of income tax information by certain undertakings and branches, and aims at enhancing transparency on corporate income taxes paid by large companies, which on its turn should improve information flows to investors and the public in general.

Through this reporting obligation, in-scope companies are required to prepare, file and publicly disclose certain tax and financial information.

Scope and content

The scope of the reporting obligation includes (i) Belgian (parent) companies with a (consolidated) turnover exceeding EUR 750 million (in each of the last two financial years) and subject to multiple income tax jurisdictions and (ii) non-EU parent companies, subject to the same turnover threshold, that are economically active in Belgium through a subsidiary or a branch and subject to the Belgian tax system.

Belgian companies that are only subject to Belgian income tax fall outside the scope of this reporting obligation. Other entities that are in principle excluded from the scope are, amongst others, credit institutions and investment companies as these are already subject to specific reporting rules.

As the information to be provided in this public report is largely the same as the one provided under the non-public CbCR, the data of the latter can be used to establish the public report. Such financial and tax information to be provided includes, amongst others, the nature of activities, revenues, profit/loss before income tax etc.

In-scope entities must file the public report with the National Bank of Belgium and, simultaneously, publish it on their company website where it should remain available during an uninterrupted period of 5 years.

Entry into force

The public CbCR obligation applies to financial years starting on or after 22 June 2024 and the report itself should be published within 12 months following the closing date of the financial year for which the report is drawn up. This timing implies that most companies (with financial statements per calendar year) will have to publish the necessary information for the first time by 31 December 2026.

Non-compliance

Non-compliance with this public CbCR obligation can result in fines ranging from EUR 50 to 10,000 and, in case of fraudulent intent, with an imprisonment for a period ranging from 1 month up to 1 year.

How can we help?

We have a dedicated Fieldfisher Belgium tax team that masters both legal and economic aspects of tax issues. The team assists businesses at all stages of their life cycle with both contentious and non-contentious, direct and indirect, tax aspects. In this respect, our team has also an extensive experience in transfer pricing matters and the relating compliance obligations.

Should you have any questions, feel free to reach out to our Fieldfisher Belgium tax team.