Important changes to transfer pricing documentation forms and guidance

As 2024 comes to an end, it is an appropriate time for a reminder of some important changes with respect to Belgian transfer pricing documentation forms and guidance which will apply to financial years starting on or after 1 January 2025.

On 15 July 2024, three Royal Decrees (dated 16 June 2024) were published in the Belgian official gazette, replacing those published on 28 October 2016 concerning transfer pricing documentation (article 321/4 § 4, 321/5 § 4, and 321/2 § 5 of the Belgian Income Tax Code 1992). The decrees introduce amendments to the information required to be reported on the master file form (Form 275 MF), local file form (Form 275 LF), and country-by-country (CbC) reporting notification (Form 275 CBC NOT).

With the aim of increasing tax transparency at both the national and international levels and clarifying interpretation, these changes will require reporting of significantly more detail and the performance of transfer pricing analyses. Businesses need to become familiar with the updated documentation requirements and ensure full compliance with the new guidelines to avoid triggering penalties or tax audits.

Background

Every Belgian group entity of a multinational enterprise (MNE) group is
required to submit Form 275 LF and Form 275 MF if they exceed at least one of the following thresholds, based on their Belgian GAAP annual accounts of the financial year immediately preceding the last closed financial year:

• Operational and financial revenue of EUR 50 million (excluding nonrecurring revenues);
• Total assets of EUR 1 billion; or
• An annual average of 100 full-time equivalent employees.

In addition, a Belgian entity that is part of an MNE group with a consolidated gross revenue of at least EUR 750 million must comply with the CbC reporting notification obligation by submitting Form 275 CBC NOT, and potentially the CbC report (Form 275 CBC) where the Belgian entity is the ultimate parent company or the surrogate parent company.

In Iight of the publication of revised OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations in 2022 (“OECD TP Guidelines”) and progressive insights obtained by the Belgian tax authorities since the introduction of the transfer pricing reporting obligations, amendments to the content of these forms have been made to increase transparency and facilitate a better informed transfer pricing risk assessment.

Overview of changes

Form 275 LF

Transaction reporting

Under the previous Royal Decree, in part B of the form, all intercompany amounts per business unit could be aggregated per type of transaction, thereby aggregating all country codes. Under the new Royal Decree, all transactions must be reported per business unit and per country code. This change will significantly increase transparency and enable the Belgian tax authorities better to track intercompany transactions involving other countries.

Inclusion of tax identification number

The form requires the inclusion of the tax identification number of the most important competitors (section A6) and the company’s permanent establishments (section B11). 

Inclusion of country code

With respect to section B12 regarding cost contribution agreements, advance pricing agreements, rulings, and in-house (re)insurance policies, the relevant country code must also be included.

Inclusion of transfer pricing studies

In section B10 of the form, the Belgian company could indicate for each transaction type—by means of a checkmark—whether the following information/documentation was available: (i) a methodology or principle; (ii) a framework agreement or model contract; and (iii) a transfer pricing study. The new Royal Decree introduces the requirement also to indicate whether a PDF is appended (similar to section B12).

When available, the transfer price methodology or principle, and/or the framework agreement or model contract, and/or the transfer price study must each be appended as a readable PDF. This may be interpreted as a de facto filing obligation of the local file report including its appendices or at least the intercompany agreements and benchmarking search write-ups (if available), which is an important difference when compared to the previous Royal Decree. Although under the previous Royal Decree it was considered “good behaviour” or “best practice” to append the local file report, it was not a formal obligation (and in practice many companies did not proactively file the available transfer pricing documentation). For financial years starting on or after 1 January 2025, not proactively filing could be considered as not meeting the annual transfer pricing documentation requirement. This could result in a reversal of the burden of proof from the tax authorities to the taxpayer and in all cases would be considered a “red flag” by the Belgian tax authorities’ data-mining tool that could trigger a tax audit.

Form 275 MF

There are no changes to the form itself; however, the explanatory notes have been expanded, requiring significant additional information and analysis.
Some of the new requirements included in the explanatory notes go beyond what is typically included in an OECD compliant master file report. For non-Belgian headquartered groups, a localised version may be required to meet the Belgian requirements.

The main additional requirements in accordance with the explanatory notes are summarised below.

Description of the business

A description of the analytical framework for the value chain and functional analysis of the group which should address the following four steps:

• Step 1: Establishment of the key drivers of the business profits (“value drivers”) and their relative importance;
• Step 2: Determination and mapping of the principal contributions to value creation by individual entities within the group (including a written functional analysis, i.e., key functions performed, significant risks assumed, and important assets used);
• Step 3: Allocation of the profits to the individual entities based on the value creation per each primary function; and
• Step 4: Comparison and alignment with transfer pricing outcomes.

Intangibles

A general description of the MNE group’s overall strategy for the development, enhancement, maintenance, protection, and exploitation of intangibles (DEMPE).
Furthermore, a description of the analytical framework for the DEMPE functions of intangibles should be included, which should address the following steps (in line with paragraph 6.34 of the OECD TP Guidelines):

• Step 1: Identification of the intangibles and the risks associated with the DEMPE of the intangibles;
• Step 2: Identification of the contractual agreements with special emphasis on determining legal ownership of intangibles and the contractual rights and obligations, including contractual assumption of risks in relations between associated enterprises;
• Step 3: Identification of the parties performing DEMPE functions, by means of a functional analysis and in particular which parties control (i) any outsourced functions, and (ii) specific, economically significant risks;
• Step 4: Confirmation of the consistency between the terms of the relevant contractual arrangements and the conduct of the parties, and determination of whether the party assuming economically significant risks controls the risks and has the financial capacity to assume the risks relating to the DEMPE
• Step 5: Delineation of the actual controlled transactions related to the DEMPE in light of the legal ownership of the intangibles, the other relevant contractual relations, and the conduct of the parties, including their relevant contributions of functions, assets, and risks; and
• Step 6: Where possible, determination of the arm’s length prices for these transactions consistent with each party’s contributions of functions performed, assets used, and risks assumed.

The explanatory notes have also been updated or amended with regard to the following requirements:

• A list of intangibles or groups of intangibles of the MNE group that are important for transfer pricing purposes, the entities that legally own the intangibles, and the entities that perform a DEMPE function in relation to the intangibles; and
• A new requirement for a list of transferred or used hard-to-value intangibles (HTVI) of the MNE group including a reference to the definition and features of these HTVI (in line with paragraphs 6.189 and 6.190 of the OECD TP Guidelines), the entities that legally own them, and the entities that participated in the creation of the HTVI.

Financial transactions

A general description of the MNE’s general transfer pricing policies related to financing arrangements between associated enterprises containing at least the following (as defined in chapter X of the OECD TP Guidelines regarding the transfer pricing aspects of financial transactions):

• Description of the application of the principles of identifying the commercial or financial relations to the financial transactions;
• Determination of the arm’s length conditions for treasury activities including intragroup loans, cash pooling, and hedging;
• Examination of financial guarantees; and•Analysis of captive insurance companies.

In recent years, against the backdrop of the changing financial climate, tax authorities globally, including the Belgian tax authorities, have increasingly focused on the arm’s length conditions for intercompany financial transactions, and this trend is likely to continue.

Form 275 CBC NOT

For financial years starting on or after 1 January 2025, it will be possible to indicate whether the notification is an initial notification, a modification of a previous notification, or a termination of the reporting obligation as a result of no longer being part of the MNE group. This addition addresses certain shortcomings from the past, providing clear distinctions between different types of notifications and streamlining the notification process.

Timing

The amended forms apply to financial years starting on or after 1 January 2025, corresponding to assessment years starting on or after 1 January 2026. For taxpayers whose tax year is aligned with the calendar year, the expected filing deadlines for the financial year 2025 are 30 September 2026 for Form 275 LF and 31 December 2026 for Form 275 MF.

How Deloitte Belgium can help

In response to Belgium’s evolving and increasingly complex transfer pricing requirements, Deloitte’s tax specialists offer specific guidance to ensure a clear alignment between documentation and form obligations. Combining technical know-how with practical insights, we support taxpayers at every stage, delivering comprehensive solutions that address compliance needs and enhance overall tax efficiency.