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Have Transactions in Belgium? Read This.

March 3, 2022

Some like to celebrate the new year with a bottle of champagne and a handful of noisemakers. But the Belgian tax authorities have a different tradition—they break in the new year with a round of transfer pricing audits. (Happy new year?) In fact, the tax authority has a whole department—known as the transfer pricing cell (TP cell)—dedicated to reviewing the transfer pricing of multinational companies. But even if you’re familiar with the TP cell, it’s probably not the same unit you remember. Today, Belgian’s transfer pricing audit department is aggressive, smart, and sophisticated—incidentally, a deadly combination in a tax authority. The TP cell launches the new year by requesting information about related-party transactions from taxpayers of all sizes (gone are the days when only large companies were under the radar). And you can forget about a list of general questions. Now, questionnaires are customized for taxpayers—with inquiries about intercompany financing, acquisitions, and restructurings. How do they know what they’re looking for? The TP cell has just about doubled in size over the last five years—more staff is on the way soon—so they have the resources to comb through master and local files and catch discrepancies in country-by-country reports. All of which they do, and they may even ask for more specifics on functions, assets, and risks. Staff is specifically trained in transfer pricing and auditors are known to invite themselves in for meetings, and often if one entity waves a red flag, they’re likely to review all Belgian taxpayers in a multinational group. Today’s TP cell expects results: Audits used to end in negotiations, but now they’re more likely to close with adjustments. How can you defend your transfer pricing against such a strategic group? Construct a solid transfer pricing policy that reflects the reality of your business and maintain consistent and contemporaneous transfer pricing documentation—consider them your new year’s resolutions.