Apart from the new tax regime for the sharing economy, the Programme law of 1 July 2016 (Belgian State Gazette 4 July 2016) introduced a number of other fiscal measures, including provisions that introduce transfer pricing documentation in line with Action 13 of the OECD’s BEPS project and other budgetary measures, including measures to combat tax fraud.
The Law implements the three-tiered standardized approach set out in Action 13 of the OECD’s BEPS project, in the new articles 321/1 to 321/7 of the Tax Income Code 1992 with a master file, a local file and country-by-country reporting.
Every year, Belgian resident parent companies of multinational groups with consolidated gross revenue of EUR 750 million must file a country-by-country report.
A Belgian company that is not the ultimate parent company may be appointed as the “surrogate ultimate parent company” if (1) the ultimate parent entity is not obliged to submit a country-by-country report in its country of residence, if (2) the ultimate parent entity is obliged to submit a country-by-country report, but there is no automatic exchange of country-by-country reports between Belgium and its country of residence, or if (3) the ultimate parent company is obliged to submit a country-by-country report, and even if there is automatic exchange of country-by-country reports, there is no effective exchange of information due to systematic failure.
In each of these three situations, a group can decide to nominate a Belgian company as the surrogate ultimate parent entity that will comply with these country-by-country reporting obligations. A Belgian group entity will need to notify to the Belgian Tax Authorities that it is either the ultimate or surrogate group company, and if it is neither, it must report the identity and the residence of the ultimate or surrogate group entity.
The report must detail for each country where the group has activities: the gross revenue, the profit or loss before income tax, the income tax paid, the income tax accrued in the financial statements, the share capital, the retained earnings, the number of employees in full time equivalents, and the company’s tangible assets. The report must be filed on a specific form that will be determined by Royal Decree within twelve months after the end of the financial year.
It must be completed in one of the three official languages, but the information may also be provided in English. The information contained in the country-by-country reports will be exchanged with the tax authorities of other countries when so required by “qualifying” agreements, such as the Multilateral Convention on Administrative Assistance in Tax Matters of 25 January 1988, bilateral or multilateral tax conventions, or tax information exchange agreements to which Belgium is a party.
Master file and local file
Belgian companies that are part of a multinational group if the financial statements for the previous year show that they meet one of the following criteria must keep a master file and a local file:
- its gross operating and financial revenue (excluding non-recurring items) is EUR 50 million;
- its balance sheet total is EUR 1 billion;
- it has 100 employees (in full time equivalents per year
The master file or group file is an overview of the multinational group: the nature of its business activities, its intangible assets, the intragroup financial activities, the consolidated financial and tax position of the group, its general transfer pricing policy and the worldwide allocation of income and economic activities in order to support the tax authorities when they assess transfer pricing risks.
The master file must be filed with the Belgian tax authorities within twelve months following the end of the financial year.
The local file must be filed with the tax return. It gives general information on the local entity and contains a detailed form with the transfer pricing analysis of transactions in excess of EUR one million between any business unit of the local entity and the overseas entities of the group. In particular, these forms give information about the relevant financial information of the transactions, the comparability study, the selection and the application of the most appropriate transfer pricing method.
The new rules will apply to financial years starting on or after 1 January 2016.