Belgium: Shifting gears towards transfer pricing audits

Written by Philippe Vanclooster 8 February 2013


In brief

In the last few days in Belgium, PwC has observed a large number of transfer pricing audits being initiated. The Belgian tax administration appears to be shifting gears on the transfer pricing front in order to raise revenues and prevent erosion of the tax base. Due to the lack of resources within the central group of experienced transfer pricing auditors, it has been decided to expand the team with regional tax inspectors in order to increase transfer pricing scrutiny.

Multiple taxpayers have recently received lengthy and in-depth questionnaires on their transfer pricing policy. It is in principle mandatory to reply to this request for information within one month. These questionnaires are sent out as the start of a thorough transfer pricing audit. It is expected that the number and detail of transfer pricing audits will increase dramatically over the next month and it will be of vital importance for taxpayers to proactively assess how well they are prepared for such audits.

In detail

Additional resources to perform audits

In 2006, a specialised transfer pricing group within the Belgian tax administration was established to perform in-depth transfer pricing audits of multinational groups. Even though there has always been a scarcity of resources to audit intercompany transactions compared to neighbouring countries, this transfer pricing group has been very effective because of their efficiency and expertise. Transfer pricing adjustments have resulted in material amounts of additional

taxes per year and a great number of companies have already spent massive time and resources in dealing with transfer pricing audits.

In addition to new investments in data-mining techniques, the group of specialised transfer pricing auditors is now calling on the support of regional inspectors to assist them in conducting transfer pricing audits. In a first wave, two inspectors for each of the seven selected regional offices have been added to the team. These inspectors have received extensive training and will continue to receive appropriate support during the audit processes.

Significant increase in audits already taking place

The first step of the roll-out has started and PwC has already observed the sudden and significant increase of requests for transfer pricing information from a variety of taxpayers. Based on our intelligence, some 150 audits have been initiated.

Proactive stance is of crucial importance

not the case that specific industries are under audit all at once. Hence, it is of crucial importance for all Belgian companies to make an up-front assessment how well they would be equipped in dealing with a transfer pricing audit. In particular, taxpayers can prepare themselves by:

  • mapping their intercompany transactions,
  • identifying potential risk areas,
  • spotting potential inconsistencies between contractual framework, policy and actual conduct, and
  • considering the audit strategy that should be pursued.

Opportunity to have pre-audit meeting

A transfer pricing audit needs to be carefully managed given the amounts that are often at stake for groups that operate in an international context. When faced with the thorough questionnaire, it is strongly recommended to request a ‘pre-audit’ meeting so as to be able to explore, in consultation with the tax authorities, the appropriate scope of the transfer pricing audit and what information is most relevant to the investigation. The option for having such pre-audit meeting is put forward by the tax administration and is also recommended as a best practice by PwC.

For more information on this topic please contact:

Isabel Verlinden

Tel. +32 2 710 4422