Belgium further enhances its transfer pricing documentation and filing requirements

On 15 July 2024, two new Royal Decrees of 16 June 2024 were published in Belgium, providing updated models of the Local File Form (275.LF) and the Master File Form (275.MF). Qualifying taxpayers are required to submit these updated forms to the Belgian tax authorities through the online portal for financial years starting on or after 1 January 2025. Also, the information and filing requirements of the country-by-country notification (275.CBC.NOT) were updated.

These new Royal Decrees of 16 June 2024 replace the Royal Decrees of 28 October 2016 with respect to transfer pricing documentation (article 321/5 §4 and §5 of the Belgian Income Tax Code). The new Royal Decrees require the inclusion of additional information in both the Local File Form and the Master File Form, but also mandate the submission of available TP documentation, framework agreements and model contracts. It requires the submission of Form 275.CBC.NOT in cases of termination of the notification obligation as well. This new model for the forms will be applicable to the financial years starting on or after 1 January 2025.

BACKGROUND

Belgium introduced mandatory transfer pricing documentation and country-by-country reporting requirements following Action 13 of the OECD Base Erosion and Profit Shifting (BEPS) project. These requirements are applicable to financial years starting on or after 1 January 2016.

Every Belgian group entity or Belgian branch of a foreign entity is required to prepare and file a Master File form (275.MF) and a Local File form (275.LF) when one of the following criteria is exceeded in its statutory financial accounts in the financial year preceding the year for which it is required to submit these files:

• Total operating and financial revenues equal to or exceeding EUR 50 million (excluding non-recurring items);
• Balance sheet total equal to or exceeding EUR 1 billion;
• Average annual number of employees of 100 in full-time equivalents (FTEs).

The Local File form (275.LF) must be filed annually and is considered as an integral part of the income tax return.  It requires the disclosure of key business, transactional and transfer pricing information. The Master File form (275.MF) must be filed annually with the Belgian tax authorities within 12 months after the group’s financial year-end. The required content of the Master File was generally in accordance with the OECD Guidelines and BEPS Action 13.

In addition, each Belgian entity of a qualifying multinational group (i.e., groups with a consolidated group turnover equal to or exceeding EUR 750 million in the preceding year) should file a country-by-country reporting notification form (275.CBC.NOT) with the Belgian tax authorities indicating whether or not the Belgian entity is the ultimate parent company, the surrogate parent company or a regular Belgian constituent entity and indicating which entity within the group will be the entity filing the CbC report. The notification should be filed with the Belgian tax authorities for the first time by the end of the financial year of the group, and only in case of any changes to be reported compared to the notification submitted for the previous financial year a new notification should be filed within that same due date.

NEW ROYALTY DECREE FURTHER ENHANCES THE DOCUMENTATION AND REPORTING REQUIREMENTS

With these new Royal Decrees, Belgium introduces some adaptations to the forms 275.LF, 275.MF and 275.CBC.NOT. These changes are driven by additional insights gained by the tax authorities since the introduction of the law on transfer pricing (filing) requirements in order to better define the in-scope taxpayers and to improve the risk assessment, but also to reflect the additional guidance contained in the 2022 version of the OECD Transfer Pricing Guidelines, in particular with respect to hard-to-value intangibles and financial transactions.

The main changes are described hereafter.

Local File form (275.LF):

The new model form is generally in line with the previous model in terms of format and content but contains a few important changes. The key changes included in the explanatory note to the new model Form 275.LF are outlined below:

• A detailed overview of intercompany transactions per business unit with cross-border transactions exceeding EUR 1 million is now required to be provided separate for each country of each counterparty rather than on an integrated basis;
• Where previously only the existence/availability of a transfer pricing methodology or principle, and/or transfer pricing study was to be indicated in the Form 275.LF, the explanatory note now indicates these must be submitted together with the form in a readable PDF-format. Reference is made to the requirements included in the Local File as per the OECD Guidelines;
• Similarly, whereas previously only their existence had to be indicated, the explanatory note now indicates that when the framework agreements or model contracts of the intercompany transactions exist, they must be submitted together with the form in a readable PDF;
• Some smaller changes include that the Tax Identification Number for the competitors of the Belgian entity and for the foreign PE of the Belgian entity should be listed. Furthermore, specifications on the relevant countries included in the Cost contribution agreements, APAs, rulings and in-house (re)insurance policies should be disclosed.

Master File form (275.MF):

The new model form did not change compared to the previous model in terms of format, but the new explanatory notes to the 275.MF contain a few important additions with respect to the expected content of the Master File. This includes amongst others:

• An analytical framework for the value chain and functional analysis of the group should be included. This requires a more detailed value chain analysis as well as a comparison and alignment with the transfer pricing outcomes for example. This is further defined in the explanatory notes and goes beyond what is required under the OECD Guidelines.
• More detailed information on the DEMPE functions with respect to intangibles is expected. This includes a detailed analytical framework for DEMPE functions, but also a list of transferred hard-to-value intangibles for example. This is further defined in the explanatory notes and also goes beyond what is required under the OECD Guidelines.
• For transfer pricing policies for financing arrangements, a more elaborate description of the financial policies and transactions is required as compared to the requirements under the OECD Guidelines. This includes for example specific information on financial guarantees, captive insurance, etc.

Country-by-country reporting notification (275.CBC.NOT)

The 275.CBC.NOT has not changed significantly but now requires indicating whether the submitted form is a first notification, a modification of a previous notification, or a termination of the notification obligation. The main change compared to the past is that it is now also required to file 275.CBC.NOT in case of a termination of the notification obligation.

CONCLUSION

Belgian tax resident companies or establishments that are part of a multinational group should review this additional transfer pricing documentation and filing requirements for financial years starting on or after 1 January 2025. The recent updates to the Local File form (Form 275.LF) and the Master File form (Form 275.MF) introduce several changes that require attention. These include the submission of the Local File TP documentation and agreements and the inclusion of information in the Master File that goes beyond what is expected in the OECD Guidelines. For country-by-country notifications, the submission of Form 275.CBC.NOT is now required also in case of termination of the notification obligation.