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The Belgian Tax Administration (BTA) published on 25 February 2020 a new transfer pricing Circular (Circular 2020/C/35) (TP Circular) after it had circulated two draft versions thereof for public consultation in November 2018 and June 2019.

Inspired by the Dutch TP Decree of 11 May 2018, the purpose of the TP Circular is to summarize the post-BEPS OECD Transfer Pricing Guidelines (2017 OECD TP Guidelines) and reflect the BTA's views thereon as well as on certain other specific topics. The TP Circular also deals with transfer pricing for financial transactions and permanent establishments.

Where the original draft TP Circular indicated that it would reflect the position of the BTA, the language in the final version states that it only reflects the BTA's preferences.

Despite many comments submitted to the BTA, the final circular does not differ much from the versions circulated for public consultation, except for the application in time of the new guidance.

We hereby provide you with further information on what we believe to be the most interesting topics of the TP Circular without thereby wanting to be exhaustive. A full copy of the Dutch and French version of the TP Circular are available below.

In this issue:

The arm's length principle - some specific positions

The BTA support and follow the 2017 OECD TP Guidelines and will in principle also accept and follow later changes to these guidelines.

The fact that a transaction between related parties does not occur between independent parties is as such not considered non arm's length if it is supported by a commercial rationale. The TP Circular refers in this respect to cash pooling.

Transfer pricing methods

The BTA accepts the taxpayer's justified selection of a proper TP method without the requirement of an analysis on the basis of other methods or without the requirement to justify why these other methods were not used. Available traditional methods, and especially the CUP method, are preferred over transactional methods. If more appropriate, also other methods than those foreseen in the OECD TP Guidelines can be accepted.

Comparability analysis

The BTA prefers that a benchmarking analysis is performed on the basis of financial data of the comparables over a period of at least 3 years. The outcome thereof must, however, be used to test the situation of the tested party on a one-year basis.

The results of the tested party must in other words be arm's length on a year-by-year basis and the BTA does in principle not accept that the arm's length test is performed over a longer period during which a tested party could be remunerated arm's length when looked at this period on an aggregate basis but with results that fluctuate from one year to the other and that are not necessarily within the interquartile range for each and every year.


The BTA is aligned with the OECD guidance on intangibles and the relevance of the DEMPE functions in that context. It is worth noting that the BTA appears to put even more emphasis on the DEMPE framework in the context of transfer pricing analyses for intangible assets. The BTA considers the comparable uncontrolled price and profit split methods to be most appropriate with respect to intangibles.

Intra-group services

Pricing of intra-group services is in most cases deemed to be arm's length when cost based.

Business restructurings

The BTA seems to follow the OECD guidelines with respect to the general framework that should be applied to the transfer pricing consequences of business restructurings. This applies in particular to the question whether a business restructuring gives rise to ‘a transfer of something of value’. The BTA does seem to take a more explicit position with respect to certain aspects of business restructurings. In particular, the BTA seems reluctant to accept that any business restructuring cost would be borne by limited risk entities remunerated on a TNMM basis.

Financial transactions

The BTA provides in its new TP Circular also certain guidance with respect to the arm's length pricing of intercompany financial transactions. This guidance is closely aligned with the Transfer Pricing Guidance on Financial Transactions as released by the OECD on 11 February 2020.

Transfer pricing and permanent establishments

The BTA accepts as such the Authorised OECD Approach (AOA) regarding profit allocation to PEs but continues by stating that Article 7 of the OECD Model Convention was in this respect substantially amended in 2010 as a result of which the AOA is only applicable under tax treaties which contain this new version of Article 7.

Application in time 

The guidance in the TP Circular and the specific preferences of the BTA reflected therein apply to intercompany transactions that occurred as of 1 January 2018 (i.e. after the publication of the 2017 OECD TP Guidelines). Only for a few specific elements, the guidance only applies as of 1 January 2020.

Irrespective of the content of the TP Circular, any transfer pricing rulings obtained from the Belgian Ruling Commission prior to 25 February 2020 remain in place.

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