Take-aways

  1. In-scope taxpayers should timely consider the new forms in view of compliance with Belgian transfer pricing (TP) documentation regulations as of FY2025.
  2. The new Belgian Master File goes beyond the OECD model, which will require changes to be made to the group Master File to comply in Belgium.
  3. A notable new obligation is to perform a profit allocation analysis based on value creating functions which should then be compared with the outcome of the traditional transfer pricing model(s) in place. The outcome of such analysis can in our view only be interpreted as a mere indication of (non-) alignment of profits with value creating activities but not as a basis to perform a TP adjustment.
  4. Furthermore, a six-steps DEMPE-analysis and an identification of all transferred and used hard-to-value intangibles (HTVI) will need to be included in the Master File. This illustrates the particular focus of the Belgian tax authorities (BTA) on transactions involving intangibles as perceived in audit practice.
  5. Taxpayers will now be required to file available TP documentation as an attachment to the Belgian Local File. This new filing obligation is an additional driver for taxpayers to timely have solid documentation in place, preferably in line with the OECD Local File standard.

Background

Following Action 13 of the OECD BEPS project, Belgium introduced the obligation for Belgian group companies to submit TP documentation. Belgium opted for a three-tiered approach, through (i) the Master File with group-level information and TP policies, (ii) the Local File with entity-specific transactional data and (iii) the Country-by-Country Report (CbC Report) with reportable financial data for each jurisdiction where the group operates.

The Master File and Local File must be filed if the Belgian company reported in the year preceding the reporting year:

    1. Operating and financial revenue of at least 50 million EUR; or
    2. a balance total of more than one billion EUR; or
    3. an average headcount of 100 full-time equivalents.

Groups with Belgian presence are subject to CbC Reporting if the consolidated group revenue of the year preceding the reporting year exceeded EUR 750 million. The filing is generally done by a qualifying group parent in its jurisdiction of residence, in which case the Belgian subsidiary is exempt from filing the report in Belgium. Nevertheless, each Belgian group entity is required to notify the BTA of the identity of the group entity that will file the CbC Report. The CbCR Notification must be filed by the end of the group’s reporting period. The CbCR Notification does not need to be filed annually if no changes have occurred since the last filing.

New forms with extended documentation requirements

The Belgian Government has introduced new forms with respect to the Master File, Local File and CbC Report Notification by means of a Royal Decree published on 15 July 2024. The explanatory notes indicate what should be reported on the forms and include material changes compared to the current requirements. These changes are driven by additional insights gained by the BTA to improve their risk assessment process as well as to reflect the latest OECD TP Guidelines (TPG) of 2022.

The new forms are applicable to financial years starting as from 1 January 2025. 

Below is an overview of the relevant changes and our respective insights.

Conclusion

In-scope taxpayers should timely consider the new forms in view of compliance with Belgian TP documentation regulations as of FY2025. Indeed, material changes were introduced extending the existing documentation requirements including the obligation to file available TP documentation as an attachment to the Belgian Local File. The new Belgian Master File unfortunately goes beyond the OECD model, which will require changes to be made to the group Master File to comply in Belgium. As said changes are not required in other countries, this imposes an additional burden on multinationals operating in Belgium. Next to this, the new filing obligation of available TP documentation is an additional driver for taxpayers to timely have solid documentation in place, preferably in line with the OECD Local File standard.