As the end of 2020 fast approaches, we notice that many multinational companies during the coming weeks/months often perform an annual assessment of transfer prices. The key question asked is: “Has our transfer pricing policy that has been applied throughout the year resulted in an arm’s length outcome?”. This question is one that arises each year; but in 2020, which with the Covid-19 pandemic will go down in history as a year of exceptional events, this question is of an even greater importance for many companies. Some multinational companies perform such assessments on a more frequent basis and as a result face more limited (or even no) required adjustment at year-end. Transfer Pricing (“TP”) adjustments are important to manage as they assure arm’s length intercompany dealings. However, when changing intercompany pricing it is critical not to forget the impact of indirect taxes. After all, in certain situations, a TP adjustment might trigger an increase or decrease of customs duties and/or (import) VAT and could lead to some indirect tax compliance issues.

In July 2018, under the mandate of the Report on Actions 8-10 of the Base Erosion and Profit Shifting (“BEPS”) Action Plan (“Aligning Transfer Pricing Outcomes with Value Creation”), the OECD Working Party 6 published a non-consensus discussion draft on financial transactions. Although there were many comments and fundamental issues raised by various parties, the differences between the so-called non-consensus draft and the final report are rather limited (we refer in this respect to an article published by International Tax Review¹). Furthermore, it was already clear back in 2018 that countries participating in the OECD Working Party 6 could not reach consensus, the release date of the public discussion draft being behind schedule provided an indication (please find our initial comments on that non-consensus draft here).

De DVB wenst er de aandacht op te vestigen dat prefilingaanvragen of aanvragen die niet voorafgegaan zijn door een prefiling, m.b.t. verrekenprijzen of de aftrek voor innovatie-inkomsten (of octrooi-inkomsten), en die fiscale uitwerking hebben in een aangifte in de vennootschapsbelasting (of BNI/Ven.) welke waarschijnlijk eind september 2021 dient ingediend te worden, uiterlijk tegen 31 januari 2021 op de DVB dienen toe te komen zodat er nog een beslissing kan afgeleverd worden vóór de uiterste indieningstermijn van de aangifte in de vennootschapsbelasting (of BNI/Ven.).

In this latest edition of the WTS Transfer Pricing Newsletter, our colleagues from 13 countries provided an update on recently introduced legislations and cases. Additionally, developments in the field of transfer pricing, due to the economic and social impact of the ongoing COVID-19 pandemic are presented.

The deadline of the corporate income tax returns has been extended for the second time by the Minister of Finance, initially set 24 September 2020 (for companies with a financial year-end at 31 December 2019), first time extended to 29 October 2020, with the new due date currently set 16 November 2020. This extension has been granted after massive requests of accounting firms that were - and still are - overloaded with work due to the exceptional circumstances caused by the covid-19 crisis. More in particular, companies have been requesting assistance from accounting firms with regard to various measures taken by the Belgian tax authorities to support Belgian companies, amongst others, obtaining the appropriate support measures of the Belgian government, requesting deferment of payment of banks, apply for legal protection or bankruptcy, etc. This new postponement should allow accounting firms to submit the personal and corporate income tax returns in a (postponed) timely manner.

A NEW, YET FAMILIAR BRAND TO UNDERSCORE OUR HOLISTIC VIEW ON OUR CLIENT’S CHALLENGES AND ASPIRATIONS.

We are excited to announce that, as from now, T/A economics will be deploying its services as Tiberghien economics. Exactly 5 years after we established our privileged partnership with the highly regarded BeLux law firm Tiberghien, and based on the successful experiences we had in jointly serving our mutual clients, we felt it natural to take this next step, in order to give the market a strong signal that Tiberghien lawyers and Tiberghien economics will further intensify their network cooperation to address the challenges of their clients with a multidisciplinary mindset.

Although the arm’s-length principle, which forms the basis of the framework of transfer pricing rules, has had a long international history, it was only explicitly introduced into Belgian legislation in 2004. The Belgian legislature used the Organisation for Economic Co-operation and Development (OECD) Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations Guidelines (the OECD Guidelines) and the OECD Model Tax Convention as inspiration.

Belgium offers a full range of tax incentives enabling companies to structure their R&D activities, as well as the valorization of the intellectual property (IP) resulting from R&D activities. This comprehensive R&D regime consists of tax deductions on qualifying IP income, deductions on R&D investments and (refundable) tax credits, cash savings from partial exemption from withholding tax for qualified researchers and full tax exemption of R&D subsidies. 

The Circular 2020/C/95/Frequently Asked Questions (FAQ) (Dutch version / French version) on the Belgian innovation deduction was published on July 8, 2020. The innovation deduction provides for a deduction of 85% of the net income from intellectual property (IP). This results in an effective tax rate of 4.4% (2019) and 3.8% (as from 2020) on the net income.