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Belgium: Draft law introducing Country-by-Country reporting and Transfer Pricing Documentation requirements in Belgium currently being finalized

In Belgium a draft law that will introduce Country-by-Country reporting and formal Transfer Pricing Documentation requirements is currently being finalized. A version of the draft law dated June 2, 2016 has been introduced in the Belgian parliament on June 7, 2016.

Country-by-Country report

As many other countries Belgium will be introducing Country-by-Country reporting requirements. They will be compliant with the OECD and EU provisions. Qualifying groups (with a consolidated gross turnover exceeding EUR 750 million) will have to file the Country-by-Country report with the Belgian tax authorities within 12 months after the closing of the consolidated financial statements of the group.

Master File

Furthermore Belgium is considering introducing the obligation of filing a Master File and a Local File for each Belgian company or permanent establishment (of a multinational group) that passes one of the following thresholds (to be assessed on the basis of the stand-alone financial statements of the Belgian entity – company or permanent establishment - concerned for the preceding financial year):

  • A sum of operational and financial income (so excluding extraordinary income) of EUR 50 million;
  • A balance sheet total of EUR 1 billion;
  • An annual average of employees of 100 full-time employees.

The contents of the Masterfile will follow closely the format as put forward by the OECD. The Master File will have to be filed with the Belgian tax authorities within a period of twelve months after the close of the reporting period of the group. The filing format practicalities will be described in a Royal Decree.

Local File

The Local File (also more or less based on the OECD format) will have to be converted in a form that consists of two parts. One part of the form will contain some general information that will have to be completed and filed by all companies or permanent establishments passing one of the above quoted thresholds. The second part (a more detailed one providing mainly qualitative information on the various sorts of intercompany transactions) of the form will only have to be filled in and filed by companies or permanent establishments that have cross border intragroup transactions exceeding in total a value of EUR 1 million. In case the company or permanent establishment shelters more than one business unit the second part of the form will have to be drafted and filed per business unit. The current draft law foresees that the local file needs to be filed (in XML-format) electronically together with the Belgian income tax return.

Fines and entering into force

In case the qualifying companies and permanent establishments do not meet the reporting and filing requirements fines ranging from EUR 1.250 – 25.000 will be levied.

The transfer pricing documentation requirements will be introduced as from assessment year 2017 (so financial years ending on 31 December 2016 or later).

KPMG observation

The Belgian business community has still some concerns and queries about the practicalities and the feasibility of these concept filing requirements (especially concerning the Local File) as it is currently foreseen in the draft law. In its newsflash of May 25, 2016, the Federation of Enterprises in Belgium (VBO or Verbond van Belgische Ondernemingen/FEB or Fédération des Entreprises de Belgique) has rightfully expressed its concerns about the level of detail of the envisaged information sheet (second part of the form to be filed with the tax return) and the increase of the compliance costs of the Belgian taxpayers impacted by the pending transfer pricing documentation requirements. As such it may be that some changes could still be made during the legislative process to the current draft law documents and envisaged reporting formats.

Notwithstanding, it is clear that Belgium will soon join the ranks of other countries that have introduced country-specific transfer pricing documentation requirements. Insofar not yet done so, Belgian taxpayers should start taking the necessary steps and actions to prepare and be ready to take on board these new requirements.

Dirk Van Stappen is a partner in KPMG Belgium's tax practice, based in Antwerp and Brussels. He focuses on international corporate tax and transfer pricing.