Is your company part of a multinational group? If so, it is very likely that you have to report on transfer prices in your group. But how do you know whether the documentation requirement on transfer pricing applies to your company? And if it does, how do you meet that requirement?
Transactions between international branches were a creative way for multinationals to shift profits around and thus avoid taxes. Until the OECD decided to put a stop to the practice, that is. Since 2016, Belgium has been among the countries where a documentation requirement on internal transfer prices is one of the measures in force. The documentation gives the Belgian tax authorities an insight into the transactions of Belgian companies with other low-taxed entities in the group and to make corrections where appropriate.
This documentation requirement need not be bad news for your company, though. It represents an opportunity to examine your transfer pricing strategy and, if necessary, bring it into line with the legislation.
Is your company part of an international group? If so, you are subject to the documentation obligation for the current financial year if you exceeded one of these thresholds in the previous financial year:
Note: these thresholds apply to the separate annual accounts for your Belgian entity, not to the consolidated data for the group.
If you are required to document your transfer prices, you must submit two files: a master file for the group and a local file.
The master file provides information, among other things, about the nature of your international group’s business activities, financial transactions and intangible assets. You can usually request this master file from your parent company (unless that is your company, of course).
For the local file you always have to collect the information yourself. It includes information about your management and shareholder structure, participations and a detailed description of your activities. If you have carried out more than 1 million euros in internal transactions with your international branches, you must include these in the detailed information form in the local file.
What about the CbC-notification?In addition to the master file and the local file, there is also a country-by-country form (Form 275 CbC). This only has to be submitted by the parent entity of groups that exceed EUR 750 million in consolidated gross income. This requirement therefore only applies to a small number of multinationals headquartered in Belgium. However, as a Belgian part of a group with a foreign parent entity, you are required to tell the Belgian tax authorities where your country-by-country form is submitted. The deadline is 12 months after the last day of the reporting period. |
You must submit the master file (Form 275 MF) within 12 months of the last day of the group’s reporting period.
For the local file (Form 275 LF), the deadline is the same as for your corporate tax return. Don’t forget to tick box ‘275 LF’ when filing your tax return.
If you fail to submit your transfer pricing documentation, or submit it incomplete or late, you risk a fine of 1,250 to 25,000 euros. The Belgian tax authorities monitor the transfer pricing rules very strictly, but often turn a blind eye to a first violation.