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  • Belgian tax authorities increase the number of Transfer Pricing audits drastically

Belgian tax authorities increase the number of Transfer Pricing audits drastically

Tine Slaedts , Partner |

05 February 2019

The month of January usually marks the beginning of the work plan of the Transfer Pricing Audit Cel. The Transfer Pricing Audit Cel is a national team specialised in transfer pricing audits. This team was recently strengthened significantly and will continue to do so in 2019, as transfer pricing audits currently are one of the tax authorities' objectives. As a result, we may expect more audits in 2019 compared to last year.

Transfer pricing audits require a thorough analysis of the company's analytical figures

The journal L'Echo/De Tijd of 1 February 2019 also states that in 2018, the Transfer Pricing Audit Cel handled 132 cases, which generated nearly EUR 90 million additional tax revenue, an amount which is significantly higher than previous years.

Over the last 3 years, 419 cases generated EUR 202 million additional tax revenue.

Each audit generally starts with the submission of a standardised questionnaire of about 30 questions, which requires the collection of a significant amount of information.

In this context, a pre-audit meeting may be considered to define the scope of this questionnaire.

Transfer pricing audits are characterised by their length (18 months on average) and sensitivity. They are very lengthy and require a thorough analysis of the company's analytical figures (including the breakdown into "Business Units").

The BDO Transfer Pricing team has the experience and knowledge to support companies with such tax audits, offering the following services:

  • Proactive pre-audit analysis to identify potential risks (in the absence of the authorities);
  • Support in the early stages of an audit (pre-audit meeting, exchanges and meetings with the tax authorities, etc.);
  • Assistance with final negotiations with the tax authorities;
  • Implementations and monitoring of the tax audit.

 

Tax adjustments

Since last year’s corporate income tax reform, tax adjustments imposed in the framework of a tax audit will be considered as the minimum taxable basis against which no tax deductions (such as losses of the current year or tax losses carried forward) can be offset. This measure only applies when the tax administration actually imposes a tax increase of 10% as fine.

This implies that an adjustment will automatically lead to a "cash-out" on the part of the company concerned, even in the presence of recoverable tax deductions.

In addition, Belgian tax law not only provides for adjustments in the event of an abnormal or voluntary benefit granted, but in certain situations also in the very particular event of an abnormal or voluntary benefit received. Indeed, no deferred taxes can be deducted from the part of the profits constituted by such an advantage, insofar this advantage is received from a related party. Belgium can, therefore, adjust the taxable base, even when the Belgian entity is "favoured", which is rather rare on the international scene.

These kind of adjustments sometimes result in double taxation of the same income for two entities, linked by two different States. As a result, the risks are more substantial than ever.

 

Attachments

Link to the document

 

Contact

If you have any questions or if you would like to get assistance from one of our experts, please do not hesitate to contact the BDO Transfer Pricing team: