Base Erosion and Profit Shifting | KPMG | BE

Base Erosion and Profit Shifting

Base Erosion and Profit Shifting

Understanding BEPS and its impact on your business.

Understanding BEPS and its impact on your business.

How to manage the new extensive Belgian transfer pricing documentation filing requirements?

The Challenge

In October 2015, the Organization for Economic Co-operation and Development (OECD) released 14 final reports in relation to the 15 Base Erosion and Profit Shifting (BEPS) action points tackled in the 2013 BEPS action plan. European governments have all expressed their commitment to end BEPS and are eager to help shape and refine the plan. Now that the final reports have been issued, federal governments are making changes to their tax codes in order to be aligned with the new recommendations and regulations.

In Belgium, in line with the guidance provided by the OECD in Action Point 13 of its Base Erosion and Profit Shifting (BEPS) reports, the federal government introduced the transfer pricing documentation requirements (through the Program Law of 1 July 2016 and the related Royal Decree dated 28 October 2016).

This indicates a significant shift. Belgium is moving from an era where no transfer pricing documentation was required (unless requested in the context of a tax audit), to a formal transfer pricing documentation obligation which includes the electronic filing of all the documentation to be prepared.

Starting from FY 2016, Belgium has introduced transfer pricing requirements for filing a Master File and a Local File for each Belgian subsidiary or permanent establishment (of a multinational group) that exceeds one of the following thresholds, to be assessed on the basis of the stand-alone financial statements of the Belgian entity concerned for the preceding financial year.

 

  • A sum of operational and financial income of EUR 50 million (excluding non-recurring income);
  • A balance sheet total of EUR 1 billion; or
  • An annual average of FTEs of 100.

 

All related documents (including the Law, Royal Decree and individual Forms to be filed), as well as additional guidance, have been posted by the Belgian tax authorities on the following website:

 

Given the fact that the Belgium is taking a strict approach while other countries are not, what should multinational corporations based on Belgium do to balance their approach? How can it maintain tax efficiency without running afoul of tax authorities in Belgium and abroad with this new reality?
Understanding the specifics for Belgium will be key.

 

KPMG Approach

The transfer pricing documentation structure proposed by the OECD has been adopted by Belgium, i.e. three layers of documentation which have each a specific purpose:

  • Country by Country Reporting
  • Master File
  • Local File

 

Taken together, these three documents require taxpayers to articulate consistent transfer pricing positions.

The three reports (to be compiled in specific Form formats) will, where applicable, have to be filed annually and will need to be filed electronically. An electronic platform will be foreseen for the filing which is expected to be accessible as from July 2017.

KPMG can help Tax Directors fulfill these new requirements and manage the process flows associated to them.

 

The Benefits

With adequate preparation multinational corporations based in or with significant operations in Belgium, will be able to adapt to the new tax landscape, without suffering unwarranted disruptions in business operations or incurring excessive tax costs during the transition, whilst preserving their reputation.

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