You’ve recently filed your Belgian (non-resident) corporate income tax return? That’s great – It means it’s now time to initiate the Return-to-Provision (RTP) process.
What is Return-to-Provision?
Return to Provision (RTP) is a crucial step in the tax accounting cycle that reconciles the estimated tax provision booked at year-end with the actual tax return, ensuring any differences are appropriately reflected in subsequent reporting.
At year-end, businesses record a tax provision based on estimates and assumptions available at the time. However, once the actual tax return is filed, often months later, new information may emerge, leading to differences between what was initially booked and what is ultimately reported. RTP is the process of reconciling these differences, but this even goes beyond as RTP adjustments may also result from tax audit settlements.
While RTP is relevant in a pure Belgian GAAP context, it is equally important under IFRS and US GAAP but with an important nuance:
- Belgian GAAP: adjustments typically impact current taxes only.
- IFRS / US GAAP: adjustments may affect both current and deferred taxes.
These adjustments usually result from changes in estimates, being new facts that weren’t reasonably knowable at the time of the original provision. They are recognised in the period when the difference becomes known (upon filing the tax return or when a tax audit is settled for instance). Note that RTP adjustments are to be distinguished from errors, resulting from incorrect application of tax law or omissions, which may require a restatement of prior financial statements.
Example
A Belgian entity, part of a multinational group reporting under IFRS, closed its books on 31 December 2024. At year-end, a provision for risks and charges was booked and considered tax-exempt in both Belgian GAAP and IFRS tax provisions, considering the facts available upon assessment.
Before filing the Belgian corporate income tax return (by 30 September 2025), an in-depth technical analysis from a third-party advisor concludes that this provision should be taxed for Belgian purposes. As a result:
- Belgian GAAP: The current tax provision will be trued-up, and the current tax payable adjusted in the course of the financial year ending 31 December 2025.
- IFRS: In addition to current tax adjustments, deferred tax must be considered. If conditions are met, a deferred tax asset may be recognised, generating deferred tax income for the period ending 31 December 2025.
Why does RTP matter?
The RTP process is more than a technical adjustment, it safeguards financial integrity and compliance:
- Accuracy of financial statements: RTP ensures that the balance sheet and income statement are aligned with the actual tax obligation.
- Transparency for stakeholders: Investors, auditors, and regulators rely on accurate tax reporting. RTP demonstrates that the company proactively reconciles estimates with actual outcomes.
- Impact on key metrics: Tax expense affects net income, effective tax rate and KPIs. Correcting these figures through RTP helps maintain credibility and supports informed decision-making.
What typically drives RTP?
Several factors can cause differences between the tax provision booked at year-end and the actual tax return filed, triggering the need for RTP. For example, we note the following drivers:
- Refinements of estimates: Year-end provisions are based on estimates (e.g. on the disallowed expenses). When the return is prepared, actual figures often differ from those estimates.
- GAAP to STAT process: The process followed for the conversion between IFRS or US GAAP and Belgian GAAP can lead to manual workarounds, and late journal entries.
- Transfer pricing adjustments: Adjustments identified during documentation or audits can alter taxable income.
How can PwC help?
The RTP process can be complex and time-consuming especially when navigating differences across local GAAP and Group GAAP reporting. Our team of tax accounting specialists can support you in:
- Analysing your historical RTP drivers and identifying quick wins to reduce (ETR) volatility.
- Assessing your IFRS/US GAAP to Belgian GAAP conversion process.
- Identifying and reconciling differences between your tax provision and filed return.
- Assessing the impact on current and deferred taxes, including journal entry preparation.
- Determining whether adjustments stem from changes in estimates or errors, ensuring compliance with accounting standards.
- Documenting RTP adjustments to support audit readiness and internal controls.
- Advising on best practices to streamline your RTP process going forward.
For more insights or advice, please reach out to Koen De Grave, Maxim Allart or your regular PwC contact.
