Annual Tax, Legal, and Transfer Pricing Update 2026

VAT treatment of transfer pricing (TP) adjustments may vary (C‑726/23, Arcomet Towercranes, and C-603/24, Stellantis) between:

• Voluntary TP adjustments that either (i) remunerate a distinct service, or (ii) correct pricing of past/future transactions are within the scope of VAT. Underlying supplies will determine how VAT applies.
• Pure profit split/allocation mechanisms, which neither remunerate a supply nor are linked to specific past/future transactions, and non‑voluntary adjustments (imposed by tax authorities), which are generally outside the scope of VAT.

In practice, VAT treatment of TP adjustments should always be assessed on a case‑by‑case basis.

On 1 January 2026, structured e-invoicing became mandatory for B2B transactions where both supplier and customer are established and VAT registered in Belgium. In this context, fines of EUR 1,500 to EUR 5,000 have been introduced when taxable persons lack the technical means to issue and/or receive structured e‑invoices. The recipient’s VAT deduction right will be safeguarded even where the supplier has failed to issue a structured e-invoice. A tolerance period applies until 31 March 2026 if businesses can demonstrate timely and reasonable efforts to comply.

As from 1 March 2026, the VAT rate increased from 6% to 12% for certain rentals of furnished accommodation (e.g. hotels, B&Bs, Airbnb). The VAT rate on pesticides and other phytopharmaceutical products increased to 21%.

The 15‑year VAT adjustment period for immovable property (and 25 years for buildings let with VAT) now also applies to certain renovation services previously subject to the 5-year adjustment period when the renovation results have an economic lifetime comparable to that of a new building. 

During the seminar, an overview was provided of the Belgian tax reforms currently being implemented or in the planning stages. The most far-reaching measure remains the new capital gains tax on financial assets, which is set to take effect on 1 January 2026, for both individual and corporate income tax. The reform provides for three capital gains tax regimes: internal capital gains, substantial interest taxation, and the transfer for consideration of financial assets, each with its own rates and exemptions. It is important to note that historical capital gains from before 1 January 2026, remain untaxed: a correct valuation of financial assets as of 31 December 2025, is therefore crucial for calculating the taxable capital gain. The seminar clarified the transitional measures, the offsetting of capital losses, and special situations such as partnerships, internal capital gains, and “exit taxes” upon emigration.

Attention was also given to changes in dividend taxation, including the increase in withholding tax on distributions of liquidation reserves accumulated as of 1 January 2026, and VVPRbis distributions as of (at the earliest) 1 April 2026.

A third key pillar concerns measures to combat corporate tax avoidance, including higher minimum compensation requirements for company executives in order to qualify for reduced corporate income tax rates and stricter conditions for DBI BEVEK dividends.

Finally, R&D incentives were also addressed. For the exemption from withholding tax for R&D personnel, a notification to Belspo may soon no longer be required upon recognition as a research center. Furthermore, investments are being further incentivized through a broader investment deduction (40% thematic deduction also for large companies, starting in the 2027 fiscal year), and a preliminary draft is in the works to introduce an optional system of accelerated depreciation, specifically for investments in R&D, digital assets, energy efficiency, and military production.

How we can support you

We are happy to assist you with:

• Analyzing the impact of these reforms on your operations
• Optimizing dividend and compensation strategies
• Guidance on R&D applications and approvals
• Investment planning and tax optimization

The legislation on the Personal Income Tax Reform was submitted to Parliament at the end of December. Although less comprehensive than designed by the Expert Committee and Finance Minister, Van Peteghem, the Reform still aims to implement significant changes (such as increasing the tax-free allowances, limiting benefits in kind to 20%, and elimination of the marital quotient). 

From 2027, employers with more than 50 employees offering company cars will be obliged to offer a mobility budget as well; from 2028, this obligation will be extended to employers with 15–50 employees. Based on the draft legislation, eligibility can no longer be limited to specific groups; in principle, all company car entitled employees must be able to participate. Employers however retain the discretion to mandate a company car in pillar 1 based on objective function related criteria.

The EU Pay Transparency Directive will progressively require more openness on salary levels and structures. Employers will need to provide pay information to candidates and employees, ensure objective, gender‑neutral pay criteria, and prepare for gender pay gap reporting. The information requirements apply as from 7 June 2026, whereas the first reporting obligations will arise as from 7 June 2027, depending on employee population size. These obligations will trigger reviews of grading systems, salary bands, and performance‑related pay. 

The government has increased the attractiveness of the special expat tax regime (BBIB/BBIO). The salary threshold has been lowered to EUR 70K (threshold not applicable to researchers), and the tax-free allowances have increased from 30 to 35% whilst the annual limit of EUR 90K is removed. Unfortunately, the social security treatment has not been aligned until further notice.

The soon to be reintroduced – though slightly amended – tax regime for copyright income for IT profiles is set to be a vital compensation and benefits tool once again. Prior feasibility analysis and ruling requests will be essential, as well as reviewing integration within the current salary packages. 

Labor law regulations and the legal framework for personal guarantees are undergoing significant changes.

In labor law, the flexi-job system is being expanded to all sectors, while retaining an opt-out option for each sector. The intended effective date is currently 1 July 2026 (subject to change). Employers would be wise to start assessing now which positions could benefit from flexi-jobs and what impact this will have on their HR policies.

The general ban on night work (between 8 p.m. and 6 a.m.) would be lifted. This creates greater flexibility to deploy employees during these hours without having to rely on exception regimes every time. At the same time, proper organization of working hours, rest, and well-being remains essential.

The system for voluntary (and recovery) overtime is being reformed. The annual maximum number of voluntary overtime hours will be increased, and the formalities will be simplified. However, due to the way the transition is planned, a temporary gap may arise between the end of the current rules and the entry into force of the new system. Careful planning and timely updates to addenda and internal procedures are recommended.

Automatic wage indexation will be temporarily adjusted using the so-called “cent index.” Wages up to a certain threshold (set in the documents at EUR 4,000 gross per month) remain fully indexed; the indexation of higher wages is limited according to a specific formula, while part of the benefit for the employer is offset through a wage moderation contribution. This requires a review of wage cost projections and compensation policies.

On 1 January 2026, a new legal framework for personal securities came into effect. The Civil Code was thoroughly modernized in the process: concepts such as suretyship, guarantee, and letter of patronage are more clearly defined, stricter information and warning obligations apply, and consumers enjoy far-reaching protection regarding personal securities. For companies, this means that existing models (sureties, comfort letters, intra-group guarantees, management guarantees, etc.) should be reviewed for compliance with the new rules, including with regard to formal requirements, maximum amounts, termination options, and the relationship between the principal debtor, the guarantor, and the creditor.

It is advisable to verify whether your HR documents (employment regulations, policies, overtime clauses, compensation policies) and financial and contractual documents are in accordance with these new principles to mitigate risks and make optimal use of the new opportunities.

• Belgian transfer pricing (TP) audits are becoming increasingly intensive due to expanded audit capacity (TP Unit, Large Enterprises Unit, SME Unit, Special Tax Inspectorate), greater digitalization and a stronger federal focus on effective tax controls.
• Case law (Court of Appeal Ghent, 24 June 2025) confirms broad BTA access to taxpayer data, including e‑audits, provided there are concrete indications of relevance.
• Adjustments are frequently triggered by benchmarking challenges, GAAP differences, median adjustments, and insufficiently evidenced functional analyses.
• Debt‑capacity analyses are increasingly used in audits; interest deductions are often rejected if the business purpose of the financing cannot be demonstrated.
• Cash pooling remains a key focus area, especially the functional profile of the pool leader and the distinction between “service provider” and “in‑house bank” models.

• Local File (275 LF) updates (effective FY 2025):
  • A number of changes have been introduced which are applicable as from financial years starting on or after 1 January 2025.
• Master File (275 MF) updates:
  • New Belgian requirements going beyond what the OECD is requesting.
  • Expanded requirements on value chain description, DEMPE functions and financial transactions.

• OECD developments on global mobility and permanent establishments highlight increased PE risks relating to remote work, digital nomads, and cross‑border senior decision‑makers.
• The 2025 update to the OECD Model Tax Convention clarifies the criteria for home‑office PE, including the commercial‑reason test and durability tests (12‑month/50% thresholds).
• Latest MAP statistics show an average case resolution time of 24 months, with growing emphasis on arbitration mechanisms to reduce double taxation.

• TP functions face rising data requirements, increased audit scrutiny and more frequent compliance deadlines, making technology essential.
• The KPMG Digital Gateway centralizes TP workflows, data collection, document management, and analytics to improve efficiency and oversight.
• KPMG GenAI applications support document extraction, benchmarking reviews, contract analysis, consistency checks, and overall TP documentation quality.
• Technology has become a critical enabler for managing compliance at scale and mitigating audit risks in an increasingly complex environment.