Belgium's approach to transfer pricing issues is consistent with the OECD Guidelines and the administrative guidance2 relating to transfer pricing explicitly refers to these Guidelines. Belgium thus generally applies the arm's-length standard both under domestic and treaty tax law.

In 2004, the arm's-length principle was introduced into Belgian tax law by means of Article 185(2) of the Belgian Income Tax Code (ITC). This article is equivalent in content to Article 9(1) and (2) of the OECD Model Tax Convention. It provides for the possibility to make positive adjustments (i.e., increases) of the taxable base of Belgian corporate taxpayers involved in transactions at non-arm's length conditions (Article 185(2) Section 1, a) ITC). Article 185(2) ITC also provides for the possibility of negative adjustments (i.e., decreases) or correlative adjustments of the taxable bases of Belgian corporate taxpayers that benefited from non-arm's length transactions (Article 185(2) Section 1, b) ITC). Such downwards adjustment is subject to the application of the EU Arbitration Convention or a double tax treaty or the obtaining of an advance decision (‘ruling') from the Belgian Office for Advance Decisions (informally called the Ruling Commission).

According to the applicable administrative guidelines,3 Article 185(2) ITC applies to transactions between: (1) a Belgian company and a foreign company of the same multinational enterprise (MNE); (2) a Belgian permanent establishment (PE) and a foreign PE of another company of the same MNE; (3) a Belgian company and a foreign PE of another Belgian company of the same MNE; (4) a Belgian PE and its foreign head office; and (5) a Belgian PE and a foreign PE of the same company. Transactions not covered by Article 185(2) ITC (e.g., domestic controlled transactions, transactions between a Belgian head office and its foreign PE, cross-border transactions between a company and an individual, transactions between individuals and transactions between non-associated companies) may nevertheless fall within the scope of other transfer pricing provisions laid down in Belgian domestic tax law or in double tax treaties concluded by Belgium (see further below).

To be considered a member of the same MNE for the purpose of Article 185(2) ITC, the relevant taxpayers must be associated. A company is considered to be associated with another company if: (1) it controls such other company; (2) it is controlled by such other company; (3) it is part of the same consortium; or (4) the other company is, to the knowledge of the company's directors, controlled by a company mentioned under (1), (2) or (3). ‘Control' should be interpreted as the legal or de facto power to exercise a decisive influence on the appointment of the majority of the company's directors or managers, or on their management.

Aside from Article 185(2), the ITC contains a number of other provisions that are relevant from a transfer pricing perspective, the most important of which are Article 26 ITC and Article 79 juncto 207 ITC. These provisions are based on the Belgian variant of the arm's-length principle - the concept of ‘abnormal or gratuitous advantages'. While Article 26 ITC can result in a tax adjustment if a Belgian taxpayer has granted an abnormal or gratuitous advantage to a foreign company or individual, Article 79 juncto 207 ITC denies the offset of certain tax deductions (such as tax losses carried forward) against any abnormal or gratuitous advantages received by a Belgian company from a related party. Based on the Belgian tax authorities' interpretation of the latter provisions (which was recently confirmed by case law (see Section VII.ii, infra)), a Belgian corporate taxpayer's tax base can as such not be lower than the amount of any abnormal or gratuitous advantage received even if the taxpayer is in a loss (carried forward) position.

Furthermore, Belgian tax law contains certain specific transfer pricing-related anti-abuse provisions that target the tax deductibility of non-arm's length payments (Article 54 ITC regarding payments to tax havens and Article 55 ITC regarding interest payments) as well as a general thin capitalisation rule (Article 198, 11° ITC).


For financial years starting before 1 January 2016, no statutory requirement exists in Belgium to prepare advance or contemporaneous transfer pricing documentation. However, following the 1999 TP Circular, it is clearly recommended that Belgian taxpayers prepare the necessary documentation in order to demonstrate that their transfer pricing policy complies with the arm's-length principle. It is recommended that such documentation includes the following:

  • a a description of the activities of the group (including market position, economic circumstances, business strategies, etc.), the identification and characterisation of intercompany transactions, and the contractual relationships among affiliates; and
  • b a functional analysis (including an overview of the relevant functions, risks and intangibles), a justification of the transfer pricing methods used and an economic analysis.

In the November 2006 TP Circular, the Belgian tax authorities have listed further documentation that is recommended to be prepared by Belgian taxpayers. Given the absence of any legal requirement for transfer pricing documentation with respect to financial years starting before 1 January 2016, there is no deadline for its preparation. It is, however, recommended that each transaction is documented at the time it is executed or by the time the tax return over the relevant period is filed, as a Belgian taxpayer must, under general tax rules, provide the Belgian tax authorities with all relevant information to determine its taxable income and is required to respond to all questionnaires from the tax authorities within one month.

For financial years starting on or after 1 January 2016, Belgium introduced OECD BEPS Action 13-compliant transfer pricing documentation requirements through the Program Law of 1 July 2016.

Based on this Program Law, qualifying Belgian corporate taxpayers are required to follow the three-tiered approach introduced by the OECD and file: (1) a master file; (2) a local file; and (3) a country-by-country (CbC) report. These filings must be made through specific forms, which were laid down in a Royal Decree of 2 December 2016.

i Master file

Belgian group entities (including Belgian PEs) of multinational groups must file a master file with the Belgian tax administration within 12 months after the relevant financial year (reporting period). In this file, information must be given on several items, such as the organisational structure, a description of the business, intangibles of the multinational enterprise, intercompany financial activities and the multinational enterprise's financial and tax positions.

Belgian companies not exceeding any of the following criteria on a stand-alone basis are exempt from the obligation to file a master file: (1) operating and financial income, non-recurrent income excluded, of €50 million; (2) a balance sheet total of €1 billion; and (3) an annual average personnel number of 100 full-time equivalents.

ii Local file

The same Belgian group entities must attach a local file to their annual corporate income tax return (filing deadline is in principle between six and nine months after financial year-end).

The local file must be filed through a specific pre-set form, which requires information on the local entity and a detailed information sheet regarding the transactions between the local entity and the foreign entities of the multinational group.

The detailed information sheet must only be filed for business divisions of Belgian group entities of which the total cross-border intercompany transactions exceed €1 million. Contrary to the general information sheet, the detailed information sheets only need to be filed for reporting periods starting on or after 1 January 2017.

iii CbC report

Each Belgian group entity that is the ultimate parent entity of a multinational group must file a CbC report with the Belgian tax administration within 12 months after the relevant financial year (reporting period).

This is also the case for Belgian group entities that are not the ultimate parent entity of a multinational group if: (1) the ultimate parent entity is not required to file a CbC report in its tax residence country; (2) the jurisdiction of the ultimate parent company has, at the latest 12 months after the reporting period, no qualifying exchange of information agreement with Belgium; or (3) the jurisdiction of the ultimate parent entity is systematically failing to exchange CbC reports and the Belgian tax administration has informed the Belgian group entity thereof.

The obligation for a Belgian group entity (not being the ultimate parent company) to file a CbC report with the Belgian tax administration does not apply if: (1) the multinational group has more than one group entity with tax residency in the European Union and has appointed one of these group entities to fulfil the above filing requirement in its local jurisdiction; or (2) the multinational group has appointed a surrogate parent entity to file the CbC report in its jurisdiction, provided that such filing is required by that jurisdiction and certain other conditions are met.

Belgian group entities are required to inform the Belgian tax authorities as to which group entity will file the CbC report. This must be done by the last day of the reporting period. The deadline for the first CbC report was extended until 30 September 2017.

The CbC reporting requirement does not apply to multinational groups with a consolidated annual gross group revenue of less than €750 million.

The information to be disclosed in the CbC report under Belgian legislation is in line with what is prescribed by the OECD.

In the transition period where certain (OECD member) countries have not yet introduced formal CbC reporting requirements, Belgium is prepared to accept voluntary CbC reporting in these countries provided that a qualifying exchange of information agreement is in place within 12 months after the reporting period.

For non-compliance with the new transfer pricing reporting requirements, penalties of €1,250 to €25,000 can be imposed as of the second violation.

As a final note, under Belgian accounting law, companies are required to provide in the notes to their statutory annual accounts certain transfer pricing related information, such as: (1) information regarding certain relevant off-balance sheet arrangements; and (2) material transactions with associated parties that cannot be considered at arm's length. Belgian tax law also provides for certain reporting requirements with respect to payments to tax haven companies.


i Pricing methods

Taxpayers should use the transfer pricing method that is the most appropriate in a given case, and they should be able to support their choice for that method. There is no best method rule and taxpayers are, as such, not required to apply more than one method. All methods described in the OECD Transfer Pricing Guidelines are accepted for Belgian tax purposes. While conceptually the Belgian tax authorities prefer transactional methods, all OECD methods are accepted in Belgium (i.e., the comparable uncontrolled price (CUP), resale price, cost plus, profit split and transactional net margin methods).

Historically, a lot of weight was placed on the CUP method and the use of comparables. Advance pricing agreement (APA) practice shows, however, that the use of the transactional net margin method and other profit-based methods has currently become the rule rather than the exception. In the future, it is, in line with OECD developments, expected that the profit-split method will gain in importance.

ii Authority scrutiny and evidence gathering

In principle, the Belgian tax authorities bear the burden of proof when challenging the at-arm's length character of a transaction, although in practice this is somewhat shifted to the taxpayer. The tax authorities ask taxpayers to demonstrate that the transfer pricing methodology adopted is at arm's length. In this respect, Belgian tax law allows all means of evidence except for the oath (i.e., documents, testimonies, presumptions, etc.). The 1999 TP Circular states that evidence of non-arm's length situations will predominantly follow from presumptions made on the basis of factual evidence.

The Belgian tax administration will typically obtain the necessary information through addressing a request for information or questionnaire to the Belgian taxpayer or by means of an announced tax audit or an unannounced tax dawn raid at the premises of the Belgian taxpayer (including interviews of people present at the premises). It should be noted that the Belgian tax authorities also have the right to obtain information and documentation from third parties (e.g., a customer) established in Belgium. Every taxpayer who resides in Belgium is required to supply information and documentation requested by the tax authorities to determine the amount of income that may be taxed under Belgian tax law. This may include information with respect to their transactions with other taxpayers, which may be used by the tax authorities for the taxation of such third parties. Information provided by the tax authorities of a foreign state, pursuant to its domestic law or to any treaty to which such foreign state is a party or to EU law, can be used by the Belgian tax authorities to assess Belgian taxes as well. If the Belgian tax authorities wish to obtain information from a foreign entity (without a Belgian tax presence), they should direct the request to the foreign tax authorities using the appropriate legal procedures (e.g., in double tax treaties, the Mutual Assistance Convention, European directives).


Under Belgian statutory law, no specific rules exist regarding transfer pricing for intangible assets. Following the BEPS project, it can be expected that the Belgian tax authorities will follow and apply the DEMPE principles and that legal arrangements will experience increased scrutiny if not in line with the functionalities.


Most transfer pricing audits are concluded with a settlement between taxpayer and the tax authorities on the items audited. Settlement discussions typically take place at the end of a transfer pricing audit, which normally takes between nine and 18 months, and on the basis of the issues retained by the tax authorities.

Upfront comfort on transfer pricing issues can be obtained through an APA. The Belgian Ruling Commission, being a separate service within the Belgian tax administration, provides unilateral APAs. Bilateral and multilateral APAs have to be applied for with the Department of International Relations of the Federal Service Finance. APAs are provided on an individual and case-specific basis.

A lot of transfer pricing rulings have been issued by the Ruling Commission over the past years on different types of transfer pricing issues: cost plus rulings for intra-group support services and toll manufacturing services, rulings determining what an appropriate margin is for full-fledged distributors or limited-risk distributors, etc.

An APA or transfer pricing ruling must relate to an actual and fully disclosed transaction or situation that has not yet produced any effects from a tax perspective (i.e., in general for as long as the tax return for the relevant financial year is not yet filed, which is normally six to nine months after the financial year-end). Applications for theoretical or hypothetical cases are not permitted. Additionally, no ruling is possible with respect to operations that have no economic substance in Belgium or transactions with tax havens. Finally, an APA or transfer pricing ruling cannot be obtained with respect to transactions that are subject of a pending tax dispute.

The request for an APA must be filed in writing with the Ruling Commission (or the Department of International Relations of the Federal Service Finance for bilateral and multilateral APAs) by or on behalf of a Belgian taxpayer. Anonymous filing is not possible. Until the APA is granted, all new information relating to the transaction must be added to the APA request. A copy of all APAs concerning the same transactions that have been requested and obtained from tax authorities of EU Member States or states with which Belgium has a double tax treaty on the same subject must be added to the ruling request. No fee is charged for the request or grant of an APA.

The APA procedure is as follows:

  • a Usually, a pre-filing meeting is organised to discuss the transaction (possible on a no-names basis). Such pre-filing meeting is preceded by a written pre-filing meeting request in which the transactions and the transfer pricing matters are described. Pre-filing meetings are often conducted using a slide presentation.
  • b A formal ruling request is filed.
  • c Within five working days, the receipt of the APA request is acknowledged and the names and contact details of the officials responsible for the APA request are communicated.
  • d A first internal meeting is organised to see whether the request contains all necessary information and what time frame is required to take the decision.
  • e Following the first meeting, the Ruling Commission further examines the APA request and may ask for additional information.
  • f There is no formal time limit for granting the APA but it generally takes about six months or more (four months for less complex APA requests).

Taxpayers are expected to provide the Ruling Commission with the identity of all parties involved, a detailed description of the applicant's business activities, a complete and accurate description of the relevant transaction, a fully detailed functional and risk analysis, a benchmarking study to support the arm's-length nature of the transfer prices, and the legal basis on which the ruling should be granted.

An APA binds the Belgian tax administration and can be relied upon by the Belgian taxpayer for the period as determined in the APA. Typically, this term is five years. APAs are renewable if the facts and circumstances on the basis of which the APA was granted remain unchanged. However, an APA will not be binding if, among others, the description of the envisaged transaction was incomplete or incorrect, essential elements of the transaction were not carried out in the way in which they were presented in the APA request, or the terms and conditions of the APA were not respected. The taxpayer is not bound by an APA and there is no obligation on its part to implement the envisaged transaction or operation on which an APA was obtained.


A dedicated transfer pricing audit team exists within the Belgian tax administration. This team specialises in carrying out transfer pricing audits and assists on transfer pricing matters identified in tax audits carried out by local tax inspectors.

As of 2013, the audit activity of this transfer pricing unit significantly increased as the team was significantly expanded. Since then, the transfer pricing unit launches about 300 transfer pricing audits at the beginning of each calendar year.

The 1999 TP Circular hints towards an in-depth transfer pricing audit when one or more of the following risk indicators are present:

  • a the company provides vague, unsuitable or insufficient information concerning its transfer pricing;
  • b certain financial ratios derived from the company's accounts differ substantially from those customary in the company's sector; and
  • c the company enters into transactions with companies located in low-tax jurisdictions or companies with substantial and/or recurrent losses.

The 2006 TP Circular has further complemented the 1999 TP Circular and provides for an additional and non-exclusive list of circumstances that can give rise to a transfer pricing audit:

  • a the use of tax havens when little or no economic value is added (e.g., re-invoicing activities) and (in)direct payments to entities in tax havens (commissions, royalties, management fees, etc.);
  • b the use of back-to-back structures to conceal the true nature of the transaction;
  • c complex arrangements and circular structures that add little or no economic value;
  • d Belgian group entities incurring structural losses;
  • e company restructurings and delocalisation of entities, particularly with respect to the valuation and compensation of intellectual property (IP) such as patents, know-how and goodwill, as well as with respect to the legal and economic ownership of the IP; and
  • f invoices for the provision of intercompany services (management fees) at year-end.

The general statute of limitations rules apply to transfer pricing matters. In general, the Belgian tax authorities can open an investigation and make additional assessments during a period of three years following the closing of the financial year. In case of fraud, the limitation period of three years is extended by an additional four years (i.e., seven years in total), provided that the tax authorities can establish serious indications of fraud and the taxpayer is informed thereof in advance. In specific cases, the tax authorities are authorised to issue an assessment even after the expiry of the above-mentioned three- or seven-year statute of limitations periods.

A transfer pricing audit typically starts with a standard written request for information. In principle, the taxpayer is required to provide the requested information within one month. Failure to provide the requested information in time may result in an ex officio assessment. In practice, tax inspectors will often extend this deadline upon request by the taxpayer, provided that a longer period is required to gather all requested information (e.g., because information needs to be obtained from foreign group companies). The November 2006 TP Circular acknowledges this and instructs tax inspectors to show the necessary flexibility when receiving a reasonable request to extend the deadline for answering the request for information.

The November 2006 TP Circular encourages tax inspectors to hold a pre-audit meeting with the taxpayer concerned to discuss: (1) the scope of the transfer pricing audit; (2) the transfer pricing policy of the group; and (3) the level of transfer pricing information readily available. This is aimed at avoiding unnecessary or irrelevant requests for information and minimising the cost for the taxpayer concerned. Most taxpayers request a pre-audit meeting upon receipt of a request for information.

Upon completion of a transfer pricing audit, the tax inspector may propose an amendment of the corporate income tax base in a notice of amendment. This notice must set out the reasons for the proposed amendment. The taxpayer has one month to oppose such an adjustment. Subsequently, the tax inspector will issue a tax assessment in which the taxpayer's arguments may or may not be taken into account. The taxpayer has six months to appeal the tax assessment before the regional Tax Director. The decision of the Tax Director may further be appealed before Belgian courts (see Section VII, infra).

Currently, the Belgian tax authorities appear to focus on the transfer pricing of IP-related transactions (e.g., payment of royalties) and intercompany fee structures, financial transactions (including thin-cap), business restructurings and the value added by the different parties to an intercompany transaction.


i Procedure

The taxpayer has six months to appeal against a tax assessment before the regional Tax Director. In the context of a tax complaint, the tax authorities may demand all information they deem useful, including information from third parties such as suppliers, clients and banks. The taxpayer or his or her representatives may make oral or written submissions so long as no decision is taken. The Tax Director may confirm the assessment as issued, vary the assessment by issuing a revised reassessment, or vacate the assessment; he or she may not increase the assessment.

In the event the tax complaint does not result in an acceptable resolution, the taxpayer may appeal to the competent Belgian Court of First Instance. The appeal must be filed with the court within three months after the dispatch of the decision of the regional Tax Director.

It is possible in the writ of appeals to invoke new legal or factual arguments that have not yet been invoked in the tax complaint. The writ of appeals should contain a summary of the arguments, which can be further developed in briefs of arguments later on in the procedure. Once the taxpayer and the tax authorities have exchanged their briefs of arguments, a hearing is fixed before the court at which the parties plead the case.

The decision of the Court of First Instance may be appealed by the taxpayer or the tax authorities to the competent Belgian Court of Appeals within one month following the notification by bailiff of the decision of the Court of First Instance. The decision of the Court of Appeals may be appealed to the Supreme Court by the taxpayer or the tax authorities within three months following the notification by bailiff of the decision of the Court of Appeals. The Supreme Court will only review questions of law. If the decision of the Court of Appeals is reversed by the Supreme Court, the case will be handed over to another Court of Appeals for final determination.

ii Recent cases

With respect to the application of Article 79 juncto Article 207, Section 2 ITC, the Supreme Court has recently quashed the decision of the Court of Appeals of Antwerp of 6 November 2012, in which it was decided that Article 79 juncto Article 207, Section 2 ITC cannot give rise to a minimal taxable base (i.e., the abnormal or gratuitous advantage received) in the event the taxpayer is in a loss-making position.4 Following the decision of the Supreme Court, however, an abnormal or gratuitous advantage received by a (corporate) taxpayer is always subject to corporate income tax irrespective of the actual result of that taxpayer. This means that Article 79 juncto 207, Section 2 ITC applies if the taxable income of the taxpayer is lower than the abnormal or gratuitous advantage received, in which case the taxable base is increased to the amount of such advantage (thereby constituting a minimal tax base). The Court of Appeals of Brussels has been appointed by the Supreme Court to decide on the merits of the case.


Belgium does not apply a system of secondary adjustments. Transfer pricing adjustments may be made for tax purposes only, without any accounting impact for the companies concerned.

Belgian tax law does not provide for specific transfer pricing-related penalties. For an incorrect tax return, the tax due on the non-reported income may be increased by a penalty ranging between 10 per cent and 200 per cent of the additional amount of tax due, depending on the nature and seriousness of the infringement committed by the taxpayer. Additionally, administrative and criminal fines may become applicable.

In practice, the Belgian tax authorities often waive the 10 per cent penalty upon transfer pricing adjustments. As the penalties depend on the type of infringement and on the company's possible negligence, they can be avoided or minimised if the taxpayer can demonstrate its good faith and intent to establish transfer prices in accordance with the arm's-length principle (e.g., through its documentation effort).

If the penalty is maintained by the tax authorities (after the appeal before the regional Tax Director; see Section VII, supra), the taxpayer could request the competent Court of First Instance to mitigate the penalty applied.


i Diverted profits tax

There is no diverted profits tax regime in Belgium. The Belgian tax authorities do, however, have an increased focus with respect to substance.

ii Double taxation

As mentioned above, Article 185(2) ITC allows for downward corresponding adjustments similar to what is provided for in Article 9(2) of the OECD Model Tax Convention (see Section I, supra).

Furthermore, most of the tax treaties concluded by Belgium provide for a mutual agreement procedure (MAP). The Belgian tax authorities adhere to the principle that an upward transfer pricing adjustment in one contracting state should result in a corresponding downwards transfer pricing adjustment in the other contracting state. However, the MAP in most of Belgium's double tax treaties does not impose an obligation to eliminate double taxation. The only requirement is for competent authorities to endeavour in good faith to reach an agreement. Furthermore, as generally no deadlines are imposed, this procedure can last many years before actual remedy is obtained. Belgium's model tax convention nevertheless contains a compulsory arbitration clause. Such a clause was inserted in the 2006 Belgium-US double tax treaty.

Finally, in certain cases, double taxation can be alleviated on the basis of the European Arbitration Convention, which installs a procedure on the basis of which EU Member States are required to eliminate double taxation on the basis of mutual agreement. In a circular of 2000 (amended in 2003), the Belgian tax authorities have provided guidance on the application of the EU Arbitration Convention.5

iii Consequential impact

The transfer pricing measures and adjustments discussed above only apply with respect to Belgian income tax. A transfer pricing adjustment may, however, also impact the taxable base for Belgian VAT or customs duties. The Belgian VAT Code and the Belgian Customs Code contain proper rules in order to determine the arm's-length value of the goods supplied or imported, and the application of such rules might not always lead to the exact same market value or pricing as for transfer pricing purposes.

Finally, it should also be noted that the Belgian income tax authorities, VAT authorities and customs authorities can exchange information among each other with respect to the valuation of goods and services supplied.


Following the introduction of the mandatory transfer pricing documentation requirements, Belgium has shifted from a country without formal documentation requirements to one with mandatory filing of master file, local file and CbC reports. We expect that this will further increase the focus of the Belgian tax authorities on transfer pricing-related matters (through, for example, data mining procedures).

Apart from this concrete change in compliance requirements, we are seeing an increased focus on value chain analyses and substance requirements. Legal arrangements experience increased scrutiny if not in line with the functionalities (e.g., DEMPE).

In the future, we expect more focus on the use of profit split methods with the impact of the position of the European Commission towards transfer pricing and the focus on the CUP method (as reflected in numerous state aid decisions) still being unclear.

1 Géry Bombeke is a partner and Julie Permeke is an associate at Baker McKenzie.

2 The Belgian tax authorities have published several administrative circulars with guidelines on transfer pricing:

a a circular of 28 June 1999 regarding transfer pricing audits and commentaries on the 1995 OECD Transfer Pricing Guidelines (the 1999 TP Circular);

b a circular of 7 July 2000 (amended in 2003) regarding the EU Arbitration Convention;

c a circular of 4 July 2006 on the interpretation of Article 185(2) ITC (the Article 185(2) Circular);

d a circular of 4 July 2006 on the formation of a transfer pricing audit team; and

e a circular of 14 November 2006 on transfer pricing audits, transfer pricing documentation and the transfer pricing code of conduct (the November 2006 TP Circular).

3 The Article 185(2) Circular.

4 Supreme Court 10 March 2016, F.14.0082.

5 Circular of 7 July 2000 (amended by the Circular of 25 March 2003).