Belgium: Transfer pricing dispute concerning royalties, factoring fees, and interest deductions (court decision)

The Court of First Instance of Brussels on March 24, 2025, issued a split decision in a transfer pricing dispute involving royalties, factoring fees, and interest deductions. The court sided with the taxpayer on the deductibility of royalties and factoring fees but upheld the tax authority’s disallowance of interest deductions.

Summary

The case involved a Belgian company that paid €11.6 million in license fees to its Dutch holding company for the use of intellectual property and related strategic services. The Belgian Tax Authorities (BTA) challenged the deduction of the license fee, arguing that the payment lacked demonstrable value and constituted an abnormal or gratuitous advantage under Belgian tax law. The Court of First Instance of Brussels, however, found that the intellectual property and services had genuine value, the payments were made with the intent to generate taxable income, and there was no evidence of abnormal or gratuitous advantage. 

On the issue of interest deductions, however, the court upheld the BTA’s disallowance, citing insufficient substantiation of the intra-group financing arrangement. Additionally, the court maintained a 10% tax increase related to the interest payments, rejecting the taxpayer’s request for exemption.

KPMG observation

This decision highlights the importance of robust transfer pricing documentation, economic substance, and careful substantiation of intra-group financing arrangements. Both parties retain the right to appeal the decision.

Read a September 2025 report prepared by the KPMG member firm in Belgium