TaxNewsFlash-Transfer Pricing

October 19, 2009
No. 2009-71

Belgium: New Reporting Requirements for Intercompany Transactions and Off-Balance Sheet Arrangements in Financial Accounts—New Tool for Selecting Taxpayers for Transfer Pricing Audits by Belgian Tax Authorities

A Royal Decree (dated 10 August 2009, and published in the Belgian Official Gazette, 24 August 2009) instructs corporations in Belgium to report all material non-arm’s length intercompany transactions in their annual accounts. No further guidance is provided as to what constitutes a “material” transaction for these purposes.

Summary

Extensive reporting requirements apply to corporations listed on a stock exchange or traded on a multilateral trading facility and those that meet more than one of the criteria for being considered a large group (as defined in the Belgian companies code). These corporations must report with respect to qualifying transactions the following information:

The amounts involved in the transactions
The nature of the relationship with the related parties
Any other information that is needed to obtain an accurate view on the financial situation of the corporation

Other corporations only have to report direct and indirect transactions between the corporation and its major shareholders and its leadership (e.g., the members of the Board of Directors).

The nature and the business purpose of material off-balance sheet arrangements of which the risks and benefits may influence (the assessment of) the financial situation of a corporation also must be reported in the financial accounts. In addition, corporations subject to the extensive reporting obligations for intercompany transactions must quantify the financial impact of the off-balance sheet arrangements on their financial situation.

These new reporting requirements—both for the intercompany transactions and for the off-balance sheet arrangements—apply to financial years starting on or after 1 September 2008.

Documenting the arm’s length character of intercompany transactions and the nature and business purpose of off-balance sheet arrangements—as well as otherwise meeting the new reporting requirements—will be a necessary step for companies to protect the rights of their corporate executives who are responsible for (and involved in the drafting of) the financial accounts Furthermore, a corporation will have to prove to the Belgian statutory auditor that the corporation was not involved in material non-arm’s length intercompany transactions and/or in abnormal off-balance sheet arrangements in order to obtain sign-off on the financial accounts.

Disclosures in FIN 48 Reports Used to Select Companies for a Transfer Pricing Audit

The Belgian tax authorities have revealed that they will start using the disclosures made by multinational corporate groups in their FIN 48 reports to identify those groups that are present in Belgium for purposes of a transfer pricing audit by the special transfer pricing audit department. The special transfer pricing audit department was set up late 2004, and consists of Belgian tax inspectors who specialized in transfer pricing matters.

Multinational groups being found to be present in Belgium and having disclosed tax contingencies resulting from transfer pricing matters need to consider taking a pro-active position and preparing for the fact that they will receive an extensive questionnaire from the special transfer pricing audit department with respect to their transfer pricing policies.

After timely providing answers to the questions presented in the questionnaire, the identified corporations will be subjected to several visits by personnel of the special transfer pricing audit department, and can expect to make a significant investment of time and resources to address any proposed transfer pricing adjustments.

For more information, the leader of KPMG's Belgian transfer pricing practice:

Dirk Van Stappen, +32 (0) 3821 1918, dvanstappen@kpmg.com

To print a copy of this TaxNewsFlash article, go to: File>Print>Preferences or Properties>Landscape.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY KPMG TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

The KPMG logo and name are trademarks of KPMG International.

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.

The information contained in TaxNewsFlash-Transfer Pricing is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Direct comments to US-KPMGWNT@kpmg.com. For more information, contact KPMG’s Federal Tax Legislative and Regulatory Services Group at + 1 202.533.4366, 2001 M Street NW, Washington, DC 20036-3310.

To unsubscribe from TaxNewsFlash-Transfer Pricing, reply to US-KPMGWNT@kpmg.com and type ‘Transfer Pricing Unsubscribe' in the subject line, then click on the SEND button.

Privacy | Legal