Transfer Pricing audits – information requests sent out this week by the Belgian tax authorities
Since this week, a significant number of Belgian taxpayers received a transfer pricing request for information (‘Vraag om inlichtingen’ in Dutch/’Demande de renseignements’ in French) from the special transfer pricing audit department (‘‘TP Cell’’). This year, the TP cell makes again use of two different information requests:
- The classic information request, containing a list of 33 questions related to the company’s overall business, intra-group transactions, functions, risks and assets; and
- A new, short information request, with a list of specific questions (for example intra-group financing and withholding taxes).
One month is offered to reply to this request for information (an extension to reply can be applied for) and the possibility to ask for a pre-audit meeting (in order to fine tune the scope of the audit) is foreseen (provided the taxpayer applies for it within 10 days).
Although most requests cover 2018 and 2019, one can also expect that difficult transfer pricing issues will arise as a result of the COVID-19 pandemic covering 2020. In this respect, the OECD published on 18 December 2020 guidance on the transfer pricing implications of the COVID-19 pandemic. In this respect, tax administrations are encouraged to keep these complexities in mind when performing risk assessments, evaluating transfer pricing positions on audits and considering the support and documentation taxpayers provide that might demonstrate reasonable efforts and care when trying to comply with the arm’s length principle. More specifically, the report of the OECD provides transfer pricing guidance on:
- Comparability analysis;
- Losses and allocation of COVID-19 specific costs;
- Government assistance programmes;
- Advance Pricing Arrangements.
In order to avoid multiple visits of the Belgian transfer pricing inspectors and being confronted with considerable transfer pricing adjustments at the end of the audit, taxpayers should carefully consider what strategy to select when reacting to the questionnaire received. Also actions on a short term are required, in order to safeguard certain rights, for example for having a pre-audit meeting.
The transfer pricing department of KPMG in Belgium is well positioned to guide you through this exercise.