By Laksha Nahar and Maria Belen Del Valle
In July 2024, Belgium introduced significant updates to its transfer pricing documentation and reporting requirements, outlined in the publication of new Royal Decrees dated June 16, 2024. These changes affect the Local File Form (275.LF), Master File Form (275.MF), and the Country-by-Country Reporting (CbCR) Notification Form (275.CBC.NOT), replacing the previous regulations set out in 2016. The updated requirements ask qualifying taxpayers to submit these forms online for financial years starting on or after January 1, 2025.
Background
Belgium’s adoption of transfer pricing documentation and reporting obligations aligns with the OECD‘s Base Erosion and Profit Shifting (BEPS) project, specifically Action 13 effective from financial years beginning January 2016. Entities meeting specific financial thresholds are obliged to file:
- Master File (275.MF): Details on the group’s operations and Transfer Pricing (TP) policies
- Local File (275.LF): Transactional specifics and TP methodologies, integral to the income tax return
- CbCR Notification (275.CBC.NOT): Reporting entity structure and filing obligations within multinational groups
Key Updates to Transfer Pricing Documentation
The new Royal Decrees introduced several modifications to the existing forms, aiming to enhance the quality and scope of information provided, thereby improving the Belgian tax authorities’ ability to assess transfer pricing risks. Key enhancements include:
Local File Form (275.LF):
- Detailed breakdown of intercompany transactions per business unit and per country
- Requirement to submit TP methodologies and related documentation in PDF format
- Mandatory submission of framework agreements and model contracts
Master File Form (275.MF):
- Introduction of an analytical framework for value chain and functional analysis
- Expanded requirements for DEMPE (Development, Enhancement, Maintenance, Protection, Exploitation) functions related to intangibles
- Detailed disclosures on financial arrangements, surpassing OECD Guidelines
CbCR Notification Form (275.CBC.NOT):
- Clarification on whether the form being submitted is a first notification, a modification of a previous notification, or a termination of the notification obligation
Conclusion
Belgian companies that are part of multinational groups should take note of these new requirements, as they represent a significant shift in how transfer pricing documentation needs to be handled. The significant changes align with several recent updates made by other countries such as Denmark, which requires taxpayers to also submit transfer pricing documentation as part of the income tax return otherwise leading to hefty penalties and aggressive audits.
The updated forms and guidelines reflect a move towards greater transparency and compliance, aligning with the latest OECD guidelines. As these changes will apply to financial years starting from January 1, 2025, businesses have limited time to adjust their documentation processes to meet the new requirements.
Moreover, the Belgian tax authorities have already launched a 2024 transfer pricing audit campaign, starting with the distribution of questionnaires and pre-audit meetings. Several companies have already been approached for information on their group’s transfer pricing, and more companies are expected to receive similar inquiries in the coming months. Many of these audits are initiated through AI-based tools used to select targets. The information provided in transfer pricing forms is also used by tax authorities to identify potential audit cases, with non-compliance potentially triggering an audit.
