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Key features of 2023 transfer pricing audit wave
25 January 2023
The Belgian tax authorities’ national transfer pricing (TP) audit team has launched the 2023 TP audit wave. Initial indications are that the 2023 wave will extend over several months, even though some taxpayers may have already received a TP audit questionnaire.
Potential tax impact of a notice of amendment or an ex officio assessment not to be underestimated
12 January 2023
Belgian companies, and non-resident companies with a Belgian establishment, are required to file an annual corporate income tax return by the statutory deadline, or the deadline provided by the tax authorities if different. A company that is unable to meet the deadline may ask the tax authorities for an extension, but in practice these requests are rarely granted other than for exceptional events qualifying as “force majeure.”
New EU tax reporting obligations for digital platforms implemented
03 January 2023
On 15 December 2022, the Belgian Chamber of Representatives approved legislation amending the Income Tax Code to implement new EU reporting obligations for digital platforms as from 1 January 2023. Draft legislation imposing new obligations for payment service providers as from 1 January 2024 is expected to be presented to parliament by the end of January 2023.
EU Council formally adopts Pillar Two directive
19 December 2022
On 16 December 2022, the Council of the European Union issued a press release confirming the formal adoption by written procedure of four pieces of legislation, including the Pillar Two directive on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the EU.
Federal Budget 2023 | Overview of most relevant tax measures
14 October 2022
On 11 October 2022, the Belgian government reached an agreement on the Belgian federal budget for 2023 and 2024. A non-exhaustive overview of the most important tax and social security measures is provided below. Please note that many aspects and details of the relevant measures are still unclear to date.
Draft bill would extend investigation and assessment periods from tax year 2023
14 October 2022
On 3 October 2022, the Belgian Federal Government introduced a draft bill containing various tax and financial provisions to the Chamber of Representatives. The government is seeking through the bill to implement the "Second Action Plan for a coordinated anti-fraud policy" launched by the minister of finance and the bill includes a wide range of tax measures, primarily affecting procedural aspects.
First penalty notifications for late filing of or failure to file transfer pricing forms issued
13 October 2022
The Belgian tax authorities have sent out the first penalty notifications for the late submission of or failure to submit transfer pricing (TP) forms, seemingly for infringements committed from the 2019 financial year onwards.
US | Tax Implications of the Inflation Reduction Act of 2022
1 September 2022
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (“IRA”). The IRA is a budget reconciliation bill aimed at reducing inflation and promoting climate change and health care affordability, and is effective for taxable years beginning after December 31, 2022.
Tax Ruling Commission and Tax Conciliation Service: New board members
19 August 2022
The Tax Ruling.Commission and the Tax Conciliation Service are two autonomous departments of Belgium’s Federal Public Service Finance (“FPS Finance”). For both services, the membership of the board has been renewed this summer.
European Commission proposes directive to address tax-induced debt equity bias
19 May 2022
On 11 May 2022, the European Commission announced the release of a draft for a new directive laying down rules to address the tax-induced debt-equity bias. The proposal includes both a debt-equity bias reduction allowance (also referred to as DEBRA) in the form of notional interest deduction on equity and a general limitation on the tax deductibility of debt-related interest payments. The initiative first was announced on 18 May 2021 by the European Commission in its Communication on Business Taxation for the 21st Century.
Key features of 2022 transfer pricing audit wave
17 February 2022
The Belgian tax authorities’ national transfer pricing (“TP”) audit team has launched the 2022 TP audit wave.
In a significant change to previous years, rather than first sending a standardised questionnaire to the selected companies, the TP audit team will send a request for a pre-audit meeting. The meeting will allow the taxpayer to provide an overview of how the company operates within the group and from a transfer pricing perspective; a customised questionnaire will subsequently be issued.
EU Commission presents two new directives aiming to introduce a minimum corporate tax and tackle misuse of shell entities
13 January 2022
Two and a half months after 137 countries agreed to a corporate minimum tax in a deal brokered by the OECD, the EU Commission presented its proposal for a directive to implement the minimum tax in the EU, along with a directive that should make it hard to evade taxes through shell companies.
Belgium-Netherlands double tax treaty to be covered by MLI
7 December 2021
On 25 November 2021, the Netherlands deposited with the OECD a notification extending its list of tax treaties to be treated as “covered agreements” under the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) to include the 2001 Belgium-Netherlands treaty. This reflects a change in the position of the Dutch government which previously was in favor of renegotiating the existing treaty and waiting for a new treaty to come into effect between the two states reflecting the changes to align with the MLI.
New Belgium-France tax treaty: Key changes affecting companies
26 November 2021
On 9 November 2021, Belgium and France signed a new treaty [Dutch | French] to replace the 1964 treaty. The new treaty is more closely aligned to the latest international standards, in particular the OECD model convention and BEPS initiatives. The new treaty will apply in Belgium for taxable periods beginning on or after 1 January of the year following the year in which the treaty enters into force (i.e., once both states have notified the other that their domestic ratification procedures have been completed). It is expected that the treaty will apply in Belgium as from 1 January 2023.
EU formally adopts public CbC reporting
25 November 2021
On 11 November 2021, the European Parliament issued a press release confirming that it had formally adopted the EU public country-by-country (CbC) reporting directive in plenary session, bringing to an end a five-year legislative process that gained momentum during 2021 once a majority of EU member states agreed to move forward with the proposal. Businesses likely will need to comply with the directive by mid-2024.
General increase in registration duties on the acquisition of Flemish real estate announced
28 October 2021
The Flemish government announced in its September Declaration on 27 September 2021 a reform of the registration duties payable on the acquisition of ownership or usufruct of real property located in the Flemish region. The preliminary draft decree accompanying the 2022 budget issued on the same date provides an overview of the proposed amendments, which will affect real estate developers and investors active in the Flemish market.
Bill on “greenification” of mobility submitted to parliament
16 September 2021
The long anticipated bill on the “greenification” of mobility in Belgium, designed to encourage environmentally friendly travel, was submitted to the Belgian parliament (Dutch | French) on 14 September 2021 for approval. The bill focusses on the greenification of company cars, and the introduction of incentives for investment in charging infrastructure and zero-emission lorries. Once adopted by the parliament and signed by the king, the law will be enacted via publication in the official gazette.
G7 finance ministers agree on taxation of digitalized economy, global minimum rate
11 June 2021
On 5 June 2021, OECD Secretary-General Mathias Corman issued a statement on the high-level political agreement of the G7 finance ministers on global tax reform, including the reallocation of a share of the global residual profit of certain businesses to market countries and a minimum effective tax rate in each country in which a business operates of at least 15%.
Tax Implications of 2022 US Budget Proposal and Treasury Green Book
4 June 2021
The Biden administration recently released its budget proposal for 2022. To supplement budgetary plans, Treasury also issued a “Green Book” offering technical explanations of key revenue drivers including potential changes to US tax law impacting businesses and individuals.
EU directive introducing new reporting requirement for digital platforms adopted
25 March 2021
On 22 March 2021, the Council of the European Union formally adopted the Council Directive amending Directive 2011/16/EU on administrative cooperation in the field of taxation (also known as DAC 7) that would extend the scope of the existing provisions on exchanges of information and administrative cooperation between the member states by requiring digital platforms to collect and report information on the income realized by sellers offering certain services.
Effect of new tax on securities accounts on “Branch 23” insurance products
10 March 2021
Legislation published in Belgian’s official gazette on 25 February 2021 and effective as from 26 February 2021 introduces a new annual tax on securities accounts. An overview of the new tax is provided in our previous alert dated 26 January 2021 and this alert provides a more detailed commentary on the effect of the tax on “Branch 23” insurance products.
Further transfer pricing audit waves to be launched based on noncompliant transfer pricing forms
11 February 2021
As highlighted in our alert dated 14 January 2021, the 2021 transfer pricing (TP) audit wave is underway. Based on our initial discussions with the Belgian tax authorities, it has been communicated that further audit waves will be launched based on noncompliant TP forms. We understand that companies have a higher risk of being selected for a TP audit where they fail to file the required TP forms, file incomplete or incorrect TP forms, or fail to submit the forms by the required deadline.
2021 TP Audit wave underway
14 January 2021
In line with previous years, the national TP audit team in Belgium released the first (standard) questionnaires to kick off the 2021 TP audit wave.
Selected companies will receive the standard TP questionnaire, which typically consists of approximately 30 questions and will likely be similar to the 2019 edition, albeit with minor modifications accounting for lessons learnt during previous TP audit waves. What follows is a summary of noteworthy attention points.
OECD issues guidance on transfer pricing aspects of COVID-19
18 December 2020
On 18 December 2020, the OECD released a report outlining guidance on transfer pricing aspects related to the COVID-19 pandemic. This guidance focuses on how the arm’s length principle and OECD TP Guidelines apply to issues that may arise, or be exacerbated in the context of this crisis. More specifically, the following four priority issues are discussed: (i) comparability analysis, (ii) losses and allocation of COVID-19 specific costs, (iii) government assistance programmes, (iv) and advance pricing agreements (APAs).
Recovery reserve measure adopted: tax exempt profits to help recover pre-COVID-19 liquidity
19 November 2020
As announced in the federal government agreement, the Belgian parliament approved a new tax law on 12 November 2020 that aims to support economic recovery following the downfall triggered by the COVID-19 pandemic.
For tax years 2022, 2023 or 2024, Belgian companies will have the possibility to exempt their profits by allocating the financial results to a new tax exempt “recovery reserve”. The new measure should allow companies to maintain future profits by exempting them from tax, in turn helping restore their pre-COVID-19 equity levels faster.
OECD releases blueprints relating to the tax challenges of digitalisation
27 October 2020
The OECD/G20 Inclusive Framework on BEPS (“Inclusive Framework”), which groups 137 countries and jurisdictions for multilateral negotiation of international tax rules, agreed during its 8-9 October 2020 meeting that the two-pillar approach they have been developing since 2019 provides a solid foundation for a future agreement.
Following this meeting, the Inclusive Framework released two detailed ”blueprints” in relation to its ongoing work to address the tax challenges arising from the digitalisation of the economy.
New deadline for ruling submissions affecting 2021 corporate tax return
14 October 2020
Consequently, all pre-filing requests (or requests not preceded by a pre-filing) affecting corporate tax returns, which will (probably) need to be filed by September 2021, must be sent to the Ruling Commission by 31 January 2021 at the latest. This is to enable the delivery of a decision before the ultimate corporate tax return deadline.
Belgian Transfer Pricing documentation requirements: updated FAQ
6 July 2020
On 30 June 2020, the Belgian Tax Authorities published a Circular Letter 2020/C/88 (Dutch | French), which includes an updated Frequently Asked Questions (FAQ) regarding Belgian transfer pricing documentation requirements (i.e. Local File form, Master File form, Country-by-Country report and Country-by-Country Notification form). The Circular applies as of 1 January 2020.
Would your organisation have been ready if DAC6 began today?
1 July 2020
The EU Mandatory Disclosure Rule, also known as “DAC6”, would have entered into force today on 1 July 2020.
Under the EU Directive 2018/822 of 25 June 2018, intermediaries and relevant taxpayers should have been prepared as of 1 July 2020 to capture, assess and report any cross-border arrangements falling under the scope of certain hallmarks to the appropriate tax authorities.
Jointly controlled companies must apply interest limitation rule as stand-alone entities
22 June 2020
In response to an enquiry raised in general terms by Deloitte regarding the application of the new interest limitation rule, the Belgian Tax Authorities have specified that a 50/50 jointly controlled company, i.e. a so-called joint venture, should apply this rule as if it were a stand-alone entity. This clarification is especially relevant for Belgian real estate development groups.
DAC6 reporting deadlines extended to 2021
9 June 2020
On 3 June 2020, EU member states reportedly agreed on an optional six-month delay to (1) the reporting deadlines for intermediaries or relevant taxpayers under EU Directive 2018/822 (referred to as “DAC6”), and (2) the exchange of information under DAC6 until the beginning of 2021.
The proposal, in the form of a proposed amending directive put forward by the European Commission, is expected to be formally adopted by the Economic and Financial Affairs Council (ECOFIN), and the European Council during their next meetings on 9 June 2020 and 19 June 2020 respectively.
New COVID-19 driven corporate tax measures in the pipeline
4 June 2020
The Belgian government is working on a new wave of tax measures aimed at supporting businesses facing losses during the COVID-19 outbreak.
In this context, two income tax measures are under development, and aim at reducing current and future tax liabilities through the creation of:
- a “loss carry back reserve”, which would allow companies to offset taxable profits related to tax year 2019 or 2020 (relating to financial year closed between 13 March 2019 and 12 March 2020) with losses expected to be incurred in the subsequent tax year, i.e. tax year 2020 or 2021, and
- a "recovery reserve" to exempt taxable profits, under certain conditions, for tax years 2022, 2023 or 2024.
It should be noted that both measures are still in the pre-draft stage, meaning that the draft bill must still be finalised by the government for the Council of Ministers’ final approval and deposit with the federal parliament. Changes therefore remain possible.
European Commission proposes an extension of DAC6 reporting deadlines
11 May 2020
On 8 May 2020 and in response to the COVID-19 pandemic, the European Commission published a proposal to postpone the deadlines for reporting and exchanging information under the EU Directive 2018/822/EU (also known as “DAC6”).
Based on the proposed changes, there would be an extension of three additional months to report and exchange information on reportable cross-border arrangements under DAC6.
Grandfathering under interest limitation rule clarified in light of COVID-19 economic impact
7 May 2020
On 5 May 2020, the Belgian tax administration published circular 2020/C/62 (Dutch | French), providing new clarifications on the grandfathering rule applicable to loans concluded before 17 June 2016, in the framework of article 198/1 of the Belgian Income Tax Code (“interest limitation rule”).
Under the interest limitation rule, loans concluded before 17 June 2016 are excluded from the scope of “exceeding borrowing costs”, unless the parties agreed on fundamental changes to the terms and conditions of the loans on or after 17 June 2016; this exclusion is known as the “grandfathering rule”.
The new circular clarifies that the granting of specific payment modalities, related to bank or intercompany loans, should not constitute a fundamental change in relation to the interest limitation rule if they aim at supporting borrowers with payment issues resulting from the COVID-19 outbreak.
Adjusted credit percentages for income tax prepayments by taxpayers with liquidity problems
6 April 2020
On 3 April 2020, the Ministry of Finance announced a new measure to support business during the COVID-19 outbreak (Dutch| French). The measure applies to income tax prepayments made by Belgian companies and self-employed individuals.
To help businesses facing liquidity problems, the government decided to increase prepayment credits for the third and fourth quarter to 6.75% and 5.25% respectively. This support measure should make the postponement of income tax prepayments to the second half of the taxable period less disadvantageous.
COVID-19 a valid case to allow write-downs on trade receivables
30 March 2020
On 23 March 2020, the Belgian tax administration published Circular 2020/C/45 (Dutch | French), clarifying that the crisis caused by the COVID-19 virus can be regarded as an exceptional circumstance, thereby justifying exempt write-downs on trade receivables.
This clarification is welcome within the outbreak crisis context, in which health security measures imposed by the Belgian Federal Government will inevitably have an adverse impact on the liquidity and solvency of many enterprises.
Upcoming 2020 TP Audit wave will bring taxpayers additional points to consider
5 March 2020
The 2020 transfer pricing (‘TP’) audit wave will be launched within the coming weeks.
In accordance with new Belgian TP developments (e.g. TP circular letter, TP forms), this audit wave will likely be significant from both a qualitative and quantitative perspective. As such, taxpayers receiving a TP audit questionnaire will need to consider several key items relating to the 2020 wave.
Published Belgian transfer pricing circular: time to assess immediate impact on intercompany policies
4 March 2020
On 25 February 2020, the Belgian tax authorities published the final version of the transfer pricing circular letter (“TP circular”) on their website. The TP circular provides an overview of chapters I, II, III, VI, VII, VIII and IX of the OECD Transfer Pricing Guidelines 2017, which were adjusted following BEPS Actions 8 to 10. The TP circular also provides guidance on certain financial transactions and a high-level discussion of the OECD guidelines on permanent establishments. Where required and appropriate, the TP circular states the Belgian tax authorities’ position.
As a general introduction, the Belgian tax authorities declare an adherence to the principles of the OECD Transfer Pricing Guidelines 2017, and state that it is likely that Belgium will also accept future changes to the Transfer Pricing Guidelines.
OECD releases report on transfer pricing of financial transactions
14 February 2020
The Organisation for Economic Co-operation and Development (OECD) on 11 February released final guidance on the transfer pricing aspects of financial transactions. The long-awaited release marks the first time the OECD transfer pricing guidelines (TPG) will be updated to include such guidance.
The report takes into account the comments received in response to the non-consensus public discussion draft released 3 July 2018 and was released as part of Actions 8-10 of the base erosion and profit shifting (BEPS) project, which began in 2013.
CJEU rules Belgian stock exchange tax is not contrary to EU law
4 February 2020
The Court of Justice of the European Union (CJEU) issued its decision on 30 January 2020 in a case (C-725/18) referred by the Belgian Constitutional Court in 2018, concluding that 2017 amendments to Belgium’s stock exchange tax (taxe sur les operations de bourse/Beurstaks, or TOB) are not contrary to EU law.
Royal Decree regarding the interest limitation rule published
15 January 2020
On 27 December 2019, the Royal Decree (“RD”) of 20 December 2019 addressing the interest limitation rule (Dutch | French) was published in the Belgian Official Journal. The RD introduces several changes to the interest limitation rule (cf. Article 198/1 of the Belgian Income Tax Code (“ITC”); also known as “30% EBITDA rule”). The RD’s provisions are applicable as of tax year 2020, i.e. financial years that began on or after 1 January 2019.
Belgian Finance Minister: DRD applicable on Swiss dividends regardless of Swiss tax reform
14 January 2020
In a 14 November 2019 reply to a 24 October 2019 parliamentary question, which was published in the latest Bulletin (Dutch | French), the Finance Minister confirmed that Swiss dividends are not caught by the first exclusion ground, and continue to benefit from the 100% dividend received deduction (“DRD”), regardless of the recent Swiss corporate tax reform.
CJEU rules Belgian participation exemption applied with NID infringes EU directive
20 December 2019
The Court of Justice of the European Union (CJEU) issued its decision on 19 December 2019 in a case (C-389/18) referred by the Brussels Tribunal of First Instance, concluding that the application of Belgium’s dividends received deduction (DRD) in conjunction with the notional interest deduction (NID), infringed the EU parent-subsidiary directive (PSD). The CJEU effectively followed the opinion (French) issued by Advocate General (AG) Saugmandsgaard Øe on 5 September 2019.
OECD releases additional implementation guidance on CbC reporting
19 November 2019
The OECD on 5 November released additional guidance on the implementation of the country-by-country (CbC) reporting requirement, which was first introduced in the BEPS Action 13 final report. The new guidance expands on the implementation guidance already issued by the OECD, most recently in September 2018.
OECD proposes “unified approach” to Pillar 1 of project to address tax challenges from digitalisation of the economy
11 October 2019
The OECD on October 9 released a public consultation document on the Secretariat’s proposal for a “unified approach” under Pillar 1 of the Inclusive Framework’s project to address international taxation in the digitalised economy. Pillar 1 focuses on revising the allocation of taxing rights among countries, potentially including new approaches to nexus (permanent establishment) issues and the arm’s length principle.
Stakeholders are invited to provide comments on the document by Nov. 12. A public consultation will take place in Paris on Nov. 21-22.
The document attempts to narrow the field of options, drawing largely on aspects of the modified residual profit split (MRPS) method and the distribution-based approaches laid out in the Programme of Work to Develop a Consensus Solution to the Tax Challenges Arising from the Digitalisation of the Economy issued in May 2019, and less so on the fractional apportionment method. The document lays out a three-tier profit allocation mechanism as the foundation of Pillar 1.
Belgian Supreme Courts upholds tax-on-tax
11 October 2019
On 19 September 2019, the Belgian Supreme Court issued a judgment in a dispute where a Belgian REIT (“SICAFI” / “vastgoedbevak”; now “SIR” / “GVV”) challenged the inclusion of corporate tax paid in its taxable basis, resulting into the so-called ‘tax-on-tax’. The Belgian Supreme Court ruled in favour of the Belgian tax authorities and upheld this tax-on-tax practice. This judgment is also relevant for S-REIFs (“FIIS” / “GVBF”) and other regulated investment vehicles that have the same taxable basis as a Belgian REIT.
New deadline for submission of rulings impacting the 2020 corporate tax return
27 September 2019
The Belgian Ruling Commission published a newsflash (Dutch | French) on its website with respect to (pre-)filing requests in the field of Transfer Pricing, Patent Income Deduction, and Innovation Income Deduction.
Corporate tax return due date for tax year 2019 extended
18 September 2019
Following our alert of 4 May 2019, the Belgian tax authorities have granted an additional extension to 10 October 2019 for both the resident and the non-resident corporate income tax returns for tax year 2019 which were initially due by 26 September 2019.
Multilateral Convention status tracker now available
8 August 2019
The Multilateral Convention to implement Tax Treaty related Measures to prevent Base Erosion and Profit Shifting (Convention or MLI) constitutes a major change to international taxation.
Belgian Ministry of Finance publishes guidance on CbC reporting correction procedures
6 August 2019
On 30 July 2019, the Federal Public Service for Finance (FPS Finance) published guidance on country-by-country (CbC) reporting correction procedures.
For each reporting period, CbC reporting requires Belgian entities to provide the (FPS Finance) with the CbC Report for the multinational enterprise that they are part of, either as ultimate parent entity, surrogate parent entity or as constituent entity subject to Local Filing rules. These CbC Reports are subsequently exchanged by the FPS Finance with the Competent Authorities in all the relevant partners’ jurisdictions.
The exchanged information’s accuracy must be ensured by all involved in the reporting.
Belgium deposits instrument of ratification for Multilateral Instrument (MLI) implementation
9 July 2019
On 26 June 2019, Belgium deposited the ratification instrument enacting the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (“MLI”).
The MLI is a product of the OECD’s BEPS project and introduces changes to bilateral tax treaties worldwide through a multilateral instrument. The MLI aims to tackle tax treaty abuse, improve dispute resolution, prevent the artificial avoidance of permanent establishment status and neutralise the effects of hybrid mismatch arrangements.
Tax authorities publish communication on second corporate tax prepayment due 10 July 2019
5 July 2019
The tax authorities published a communication (Dutch | French) regarding the second corporate tax prepayment (i.e. 10 July 2019 for financial years ending on 31 December 2019). It should be noted that the payment should arrive in the tax authorities’ account number by 10 July 2019 at the latest.
OECD releases program to develop consensus solution to tax challenges arising from digital economy
6 June 2019
The Organisation for Economic Co-operation and Development (OECD), now working as the expanded OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS), released on May 31 a program of work that, if it reaches fruition and is implemented by member nations, would fundamentally alter the longstanding rules that govern the international taxation of all large multinational entities (MNEs), not just those that might consider themselves “digital companies.”
The program of work calls for “a solution to be delivered in 2020,” a time frame the 129-member Inclusive Framework acknowledges is “extremely ambitious,” and would require “the outlines of the architecture” to be agreed to by January 2020.