Transfer Pricing insights, tips & tricks Transfer Pricing insights, tips & tricks

In February 2020, KPMG organized a number of Transfer Pricing update seminars across the country and published, in this respect, some interesting poll results. The level of interest and participation reconfirmed that Transfer Pricing is and remains a hot topic. In view of the upcoming Transfer Pricing compliance season, below is a short recap of the transfer pricing documentation requirements and their respective deadlines. We also outline some key takeaways and tips & tricks.

Belgian taxpayers have an obligation to prepare and file the following forms as implemented in Belgian tax law based on the OECD’s BEPS Action 13 (if the thresholds are met):

• Local File (275 LF) – the LF form should be filed at the same time as the corporate income tax return. The deadline for the corporate income tax returns regarding FY 2019 (31 December closure) is extended from 24 September 2020 to 29 October 2020 (this additional period also applies to all returns that must be submitted between 24 September 2020 and 29 October 2020).
• Master File (275 MF) – the MF form must be filed no later than 12 months after the last day of the reporting fiscal year of the MNE group, i.e. for FY 2019 generally being 31 December 2020.
• Country by Country Reporting (275 CBC) – the deadline for the CbC Report is the same as for the MF form.
• Country by Country Reporting Notification (275 CBC NOT) – for periods ending on 31 December 2019 or later, Belgian constituent entities of an MNE group are no longer required to file the notification annually if the information already filed in previous CbCR notifications remains the same. Where there are changes to the details of the CbCR reporting entity, the CbCR notification will still need to be filed in Belgium by the last day of the Group's financial year, i.e. for FY 2020 generally being 31 December 2020.

In view of these upcoming Transfer Pricing compliance deadlines, below is an outline of some key takeaway and tips & tricks:

• Since last year, the Local File form (275 LF) has become one of the key sources for the Belgian tax authorities in defining which companies will undergo a transfer pricing audit. Proper completion of the form is therefore essential. KPMG can also recommend actions going forward to mitigate this selection risk.
• It will be essential for taxpayers to review on a yearly basis their existing intercompany pricing policy, to assess whether they are still in line with the new guidance from the OECD and the Belgian tax administration. For example, the new Belgian transfer pricing circular letter of 25 February 2020 (and updated in June 2020) refers to two effective dates: depending on the paragraphs involved, the effective date will be for transactions as from 1 January 2018 or for transactions as from 1 January 2020. During the polling held earlier this year (see link above), we learned that 75% of the attendees already had specific discussions on one of the topics mentioned in the Transfer Pricing circular letter published in February 2020 with their tax advisors and/or the tax authorities during the last 12-24 months.
• Update or renew your Transfer Pricing benchmarking studies – the Belgian administration believes that an update of your benchmark should be carried out every three years (facts and circumstances could even necessitate a faster revision). This is also confirmed in the new Transfer Pricing circular letter updated in June 2020.
• The OECD’s final report (published on 11 February 2020) on transfer pricing aspects of intercompany financing includes a significant number of far-reaching new statements that might affect current transfer pricing policies. It will therefore be essential for taxpayers to review their existing intercompany financing policies, to assess whether they are still in line with the new guidance from the OECD and the Belgian tax administration.
• With regard to the hard-to-value intangibles, a number of new insights are provided by the Belgian tax authorities. For example, it is assumed that there is always an information asymmetry between the taxpayer and the tax authorities. For this reason, the Belgian tax administration may consider ex-post outcomes as presumptive evidence of the appropriateness of ex-ante pricing arrangements.
• Always be prepared for the tax authorities to come knocking on your door – the Belgian tax authorities invest more time and people in Transfer Pricing audits every year – as no company should consider itself immune to a possible audit. Our recent polling indicates that almost 50% of the attendees at our Transfer Pricing update sessions have been subject to a transfer pricing audit in the last 24 months.
• Bear in mind that the impact of the COVID-19 crisis will have a significant impact on the Transfer Pricing policy of companies for financial year 2020 (for which the transfer pricing documentation requirements are due in 2021). More information on:
  • COVID-19, Implications from a transfer pricing perspective
  • Bolster the resilience of your transfer pricing model

These insights offer guidance to groups as changes might be necessary to your transfer pricing model in the wake of the coronavirus. Take the time now for a proper assessment and don’t wait for the 2021 transfer pricing compliance season.

For more information, please contact one of KPMG Belgium’s Transfer Pricing Partners.