Belgian tax administration publishes draft circular letter on transfer pricing


On 9 November 2018, the Belgian tax administration published a draft circular letter on the 2017 version of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (2017 OECD TPG).

Interested parties are invited to send their comments on the draft to by 12 December 2018. Attention needs to be paid that the draft and comments fall within both the international and domestic legal and regulatory framework for transfer pricing. The tax administration request respondents not to make their comments public.

What is in there?

The draft circular confirms that the Belgian tax administration adheres to the principles of the 2017 OECD TPG and to the arm’s length principle embedded in them. It gives a very short overview of the updated Chapters of the OECD TPG following BEPS Actions 8-10 (Aligning transfer pricing outcomes with value creation) and discusses very briefly

  • the arm’s length principle (Chapter I);
  • the OECD recognised methods (Chapter II – including the revised guidance on the profit split method, published in June 2018);
  • the comparability analysis (Chapter III);
  • the special considerations for intangibles (Chapter VI – including the guidance on hard-to-value intangibles);
  • the special considerations for intra-group services (Chapter VIII – including a discussion on low value-adding intra-group services);
  • the cost contribution arrangements (Chapter VIII);
  • transfer pricing aspects of business restructurings (Chapter IX).

The draft circular letter also addresses briefly some issues related to financial transactions (although no final OECD guidance has been published yet) and the basic principles of allocating profits to permanent establishments on the basis of the 2008 and 2010 Reports on the Authorised OECD Approach.

Noteworthy points

The draft circular contains some points of view on how the Belgian tax administration applies or intends to apply the 2017 OECD TPG. Some of the administration’s draft viewpoints are noteworthy.

Reference in this respect can be made to, particularly, the draft statements on a 7-year review period for so-called hard-to-value intangibles, the treatment of government subsidies/incentives, qualification of costs as disbursements, remuneration for cash pool leaders and allocation of synergy benefits, remuneration for procurement activities, and stricter requirements for benchmarking.

The draft would also implement and endorse the simplified approach for low value-adding services with a cost plus 5% being put forward.

Since the current positions as reflected throughout the paper may impact the existing TP practices of multinationals, we strongly recommend interested parties to act on the Belgian tax administration’s call and submit their comments on the draft circular.

Dutch version and French version are available.

Need help?

PwC is in the process of reviewing the circular letter and will provide its comments to the Belgian tax administration.

Our PwC transfer pricing team in Belgium is available to navigate you through the impact for your business. They have the required knowledge and expertise to help you fully understand and comply with the 2017 OECD TPG at both an international and a domestic level.