Dispute resolution in Belgium

In July 2006, Belgium’s government decided that extra effort was required to properly enforce transfer pricing compliance. As a result, it set up a special transfer pricing investigation unit with a two-fold mission:

1. To build up and share transfer pricing expertise, acting as a competence centre
2. To carry out transfer pricing audits of multinationals present in Belgium through a subsidiary or branch.

Since being set up, the unit has embarked on an extensive fact-gathering exercise and, as a result, a large range of companies have received standard transfer pricing questionnaires. In a number of cases, the questionnaires were not followed through on by the tax authorities, but some groups have been subjected to in-depth audits.

According to the official practice notes, the companies that were to be scrutinised by the tax authorities were: (1) those that use tax havens and low-tax countries where little or no economic value is added; (2) those that use back-to-back arrangements as a means to disguise the true essence of transactions; (3) those with complex arrangements and circular structures that add little or no economic value; (4) Belgian groups that undergo structural losses; (5) companies paying or receiving fees for the use of intellectual property (e.g. patents, know-how and goodwill); (6) companies that incur invoices for services at the end of the financial year (e.g. management fees).