Belgium

Market overview

Following years of intense changes to the tax system, there is an increased amount of uncertainty in the Belgian tax market. The tax authorities have tightened their screws and although the year has been relatively stable with little domestic changes, the authorities have taken a liking to thorough auditing and looking at company structures in an aggressive manner. Practitioners reported the special tax investigation team, usually in charge of tax fraud cases, have been auditing large companies with complex structures, even though they are unrelated to fraud.

"The approach and attitude of the tax authorities has changed and is substantially different than 10 years ago," said Natalie Reypens head of transfer pricing at Loyens & Loeff.

The authorities gather detailed information on taxpayers' transfer pricing policies through audit questionnaires and are expected to target approximately 150 companies in Belgium this year, according to a KPMG report. The special transfer pricing audit department's approach has become an annual occurrence with similar audit processes launched over the past three years. In 2014, 270 audits were launched this way and just under 200 questionnaires were sent out in 2015.

One major cause of this is the OECD's BEPS action plan which inspired an expansion of the transfer pricing unit within the tax authorities and increased scrutiny on companies' transfer pricing policies.

Many areas of BEPS are yet to be implemented into legislation, however a draft law introducing country-by-country reporting (CbCR) and formal transfer pricing documentation requirements was adopted into legislation on July 1 2016.

"Belgium was indeed one of the few countries that did not yet have formal transfer pricing documentation rules, although transfer pricing documentation was recommended in practice and many multinationals already have such documentation in place for their Belgian subsidiaries. This development fits within the increased focus of the Belgian tax authorities on transfer pricing audits," said Alain Huyghe, partner at Baker & McKenzie.

Similarly, taxpayers' awareness of transfer pricing has grown, despite the country being slower than its neighbours with implementing BEPS recommendations. Stibbe's head of transfer pricing, Xavier Gillot, said: "The recent TP developments brought by the adopted BEPS action points did not impact the Belgian transfer pricing market yet, it is too early, but will certainly result in transfer pricing becoming a key issue to be addressed by any Belgian taxpayer conducting activities with associated enterprises, while ten years ago, only a very limited number of taxpayers were preoccupied with transfer pricing."

The EU's Anti-Tax Avoidance Directive will become effective from January 1 2019, as the ECOFIN Council reached an agreement on the directive on June 21 2016. It was thought Belgium would object due to certain concerns that the directive would hinder the EU's competitiveness and hit the small and open economies such as Belgium, but ultimately it agreed to it.

"This shows that all those initiatives are becoming reality in the near future," said Huyghe.

In January this year, the EU Commission ruled the Belgian excess profit rulings constituted state aid. Huyghe said: "While Belgium has reasonable arguments to defend that its excess profit rulings do not constitute state aid that has to be recovered from the beneficiaries of such rulings and there is therefore a reasonable chance that those arguments are accepted by the EU courts, a lot of damage has been done in the meantime since the action of the EU Commission is not good for Belgium's image as an interesting and stable jurisdiction for foreign investors."


Tax authorities

Service Public Fédéral Finances
Boulevard Roi Albert II 33, 1030 Schaerbeek, Belgium
Tel: +32 0257 257 57
Email: info.biztax@minfin.fed.be
Website: finance.belgium.be


Tax rates at a glance

(As of June 2016)

Corporate income tax 33.99% (a)
Capital gains 0/0.412/25.75/33.99%
Branch tax 33.99%
 
Withholding tax
 
Standard rate of 27%, however several exemptions and reductions exist – see below
Dividends 0/1,6995/5/10/15/17/20/27%
Interest 0/15/27%
Royalties 0/15/27%
Branch remittance tax n.a.
 
Net operating losses (years)
Carryback 0
Carryforwards Unlimited

  1. Surcharge of 3% on income tax makes effective corporate tax rate 33.99%.

Source: AB Taxand, Taxand Belgium


Firm contact details

Loyens & Loeff