The legal framework
Belgium wrote the arm's length principle into statute comparatively late. Article 185, §2 of the Income Tax Code 1992 (CIR 92), inserted by the Law of 21 June 2004, tracks Article 9 of the OECD Model closely: paragraph (a) lets the administration add back profits that would have accrued absent the controlled conditions, and paragraph (b) provides for the corresponding downward adjustment. As enacted, however, it speaks of two companies forming part of a multinational group of related companies and of their reciprocal cross-border relations. It catches the Belgian establishment of a non-resident company only indirectly, through Article 235, 2° CIR 92 as amended by Article 3 of the same 2004 law, and attribution of profit to a permanent establishment is governed by the authorised OECD approach and treaty Article 7 rather than by Article 185, §2 itself. There is no size or turnover threshold: every company with an intra-group invoice is in scope, whatever its documentation position.
An adviser who reads only Article 185, §2 will misjudge the file, because most Belgian assessments are still built on older machinery. Article 26 attacks abnormal or benevolent advantages granted; Articles 54 and 55 shift the burden onto the payer for interest, royalties and service fees flowing to low-taxed recipients; Article 79 read with Article 206/3 blocks deductions against advantages received; and Article 344 supplies the anti-abuse route. In practice the most dangerous provision is Article 49, the business-purpose test, which allows an auditor to refuse a deduction entirely rather than debate a price — the Brussels first-instance decision of 24 March 2025 disallowed some EUR 2.8 million of interest on that basis while accepting the taxpayer's royalty and factoring positions.
Relatedness has no dedicated transfer pricing definition. It is assessed as control, direct or indirect, drawing on the commentary to Article 26 CIR 92 and Articles 10, 11 and 13 of the Companies Code, so the question is a company-law one. The OECD Guidelines are not enacted; they interpret the domestic provisions, a status anchored in the parliamentary memorandum to the 2004 law and in Circulars AFZ/98-003 and 2020/C/35. Belgium's application is semi-ambulatory: a later edition reaches back only where it clarifies, and no official list distinguishes clarification from novelty — an uncertainty the Ghent Court of Appeal exploited on 8 June 2021 in Uniclick when it refused to apply the 2017 DEMPE framework to earlier transactions.
Methods, comparables and benchmarking
Circular 2020/C/35 of 25 February 2020 is the operative text. It restates the 2017 Guidelines chapter by chapter, adds Belgian positions, and applies to intra-group transactions from 1 January 2018. The method menu is open: all five OECD methods are accepted and section 29 permits any other method producing a better arm's length result. There is no hierarchy — section 22 adopts the most appropriate method standard, and a reasoned selection is accepted without the taxpayer having to eliminate every alternative. For commodities the circular follows the Guidelines at 2.18 to 2.22 and signals CUP as the likely answer.
The benchmarking rules are where Belgium departs from a purely orthodox reading. Belgian comparables enjoy no preference, so pan-European searches are standard, and the administration is barred from assessing on secret comparables — a point worth pressing early when an auditor's counter-benchmark appears without a search strategy attached. But the range is narrowed in practice: the full range is accepted only where every comparable shows very high comparability, failing which the interquartile range governs (sections 123 to 126), and a result outside the accepted range is corrected to the median rather than the nearest quartile. Missing by a little therefore costs as much as missing by a lot, which changes the economics of setting a target within the range.
Comparability adjustments are permitted where they genuinely improve reliability, and year-end true-ups are allowed but never compulsory — which means the decision to run them belongs in the intercompany agreement, not in a December scramble. The low value-adding services simplification is available at a 5% mark-up (sections 182 to 188), though the administration reads the qualifying category tightly and regularly refuses to treat functions such as procurement as low value-adding. Intangibles follow Chapter VI, including the hard-to-value intangibles approach at 6.186 to 6.194, with two useful taxpayer protections: only one adjustment per HTVI transaction, and no reach-back into closed years. Financial transactions follow Chapter X but never in isolation, because Articles 54, 55, 198 §1 11° and 198/1 layer full denial for low-taxed lenders, a 5:1 thin-cap rule and the ATAD cap at the greater of 30% of EBITDA or EUR 3 million on top of any arm's length conclusion.
Documentation: what FPS Finance expects
The documentation regime sits in Articles 321/1 to 321/7 CIR 92, introduced by the Programme Law of 1 July 2016, and produces four filings: the master file (275 MF), the local file (275 LF), the country-by-country report (275 CBC) and the CbC notification (275 CBC NOT). The master and local file obligation is tested on the Belgian entity's own statutory accounts for the preceding period, and crossing any one of three thresholds is enough: operating and financial income above EUR 50 million, a balance sheet total above EUR 1 billion, or an average workforce above 100 full-time equivalents. CbC reporting follows the OECD standard at EUR 750 million of consolidated revenue.
Timing is asymmetric and catches groups out. The master file and CbC report are due within twelve months of the group's period end, but the local file goes in with the corporate income tax return, which makes it effectively contemporaneous — the benchmark supporting it has to exist before the return is signed, not after the audit letter arrives. Within the local file, only a business unit with more than EUR 1 million of cross-border intra-group transactions completes the detailed part. Everything is filed as XML through the BEPS13 e-service in MyMinfin. The forms accept English, French, Dutch or German, but that latitude does not extend to procedure: MAP and APA requests must be drafted in Dutch, French or German, with English confined to annexes, and audit correspondence follows Belgian administrative language law.
The form generation changed twice in eighteen months. Three Royal Decrees of 16 June 2024 rewrote the master file, local file and notification for financial years beginning on or after 1 January 2025, adding a four-step value-chain and functional analysis that must end in a comparison of profit allocation against transfer pricing outcomes, plus a list of transferred or used hard-to-value intangibles. A further Royal Decree of 7 December 2025 partly walked this back: benchmarking studies and methodology papers no longer have to be attached under section B10, though cost contribution agreements, rulings and APAs still do, while transaction reporting became more granular — method by transaction, business unit and counterparty country. Note what the identification table actually asks for: the tax identification numbers required in section A6 are those of the taxpayer's most important competitors, not of its comparables, and neither the 2024 nor the 2025 model contains a comparables-identification table. Record retention, separately, fell from ten years to seven under the Law of 18 December 2025.
Audits, penalties and the enforcement climate
The Transfer Pricing Cell runs an annual campaign. The 2026 wave opened in January with more than 300 information requests, built around a standard questionnaire of roughly thirty-two questions tailored to what the taxpayer has already filed, and often accompanied by an invitation to a pre-filing meeting. Two features matter. First, selection is not confined to groups above the 275 MF and 275 LF thresholds — smaller companies with meaningful intra-group flows are squarely in scope. Second, the files no longer stop at transfer pricing: permanent establishment, beneficial ownership, withholding tax and VAT on intra-group financial services are increasingly opened off the back of the same request.
Documentation failures attract a dedicated fine under Article 445, §3 CIR 92 — not Article 445bis, as the OECD country profile states. The Royal Decree of 29 June 2018 sets the scale: nothing for a breach outside the taxpayer's control, then nil, EUR 1,250, EUR 6,250, EUR 12,500 and EUR 25,000 for successive good-faith infringements, and EUR 12,500 rising to EUR 25,000 where bad faith or intent to evade is established. Circular 2019/C/14 confirms that rank is counted within a limb of the scale, and that an infringement counts as a repeat only if the taxpayer had already received a fine notice when the new breach occurred. Adjustments themselves carry the ordinary Article 444 increases of 10% to 200%, with no penalty protection flowing from a complete file — the Program Law of 18 July 2025 merely removes the 10% increase for a first good-faith infringement on assessments enrolled from 29 July 2025.
The limitation landscape has changed and the published OECD profile has not caught up. Where the profile still reports six years extending to ten in fraud, the Law of 18 December 2025 abolished the six- and ten-year periods, folding them into a single four-year window that is triggered by, among other things, filing a local file or a CbC report, and cut the fraud period to seven years — retroactively from assessment year 2023. Belgium applies no secondary adjustments, so a primary correction does not become a deemed dividend, and downward corresponding adjustments are available unilaterally under Article 185, §2, b), or through ex officio relief under Article 376, §1 where the year is closed.
Dispute resolution and advance certainty
Unilateral certainty comes from the Advance Rulings Service under the Law of 24 December 2002. The decision binds FPS Finance for a term normally capped at five years, is published anonymously, and is targeted at three months from a complete request, with the service confirming a timetable within fifteen working days. Two practical constraints define the workflow. Article 22 shuts the door where the transaction has already produced tax effects for the applicant or is under appeal or in litigation, and where the arrangement lacks Belgian economic substance. And for transfer pricing specifically, the pre-filing — or the request itself where there is none — must reach the service by 30 November of the first calendar year the ruling is to cover, renewals included; a non-calendar-year taxpayer should be filing at least eight months before its return deadline.
Bilateral and multilateral APAs are not handled by the ruling service at all. They go to the International Relations Service, are free of charge on the Belgian side, and in principle must be filed before the transactions occur — although in practice the service will let an APA begin on the first day of an accounting year provided the request lands by the last day of that year. Rollback exists but is deliberately thin: one prior year, identical facts, an assessment period still open when the agreement is concluded, and the foreign authority's consent.
On the resolution side, Belgium offers the full set. Treaty MAP under Article 25, the EU Arbitration Convention with its three-year window running in Belgium from the third working day after dispatch of the assessment notice, and the EU Dispute Resolution Directive as transposed by the Law of 2 May 2019 for complaints from 1 July 2019 covering periods from 1 January 2018 — the last of which must be expressly invoked when the complaint is lodged. MAP runs in parallel with domestic proceedings, and the immediately payable portion of the Belgian tax can usually be reduced to nil while it does. Domestically, an administrative complaint to the regional director within one year and three working days under Article 371 CIR 92 is a mandatory precondition to court. Prevention is also on the menu through the Co-operative Tax Compliance Programme, ICAP and the EU ETACA pilot.
Amount B, Pillar Two and what changes in 2026
Belgium's answer on the simplified and streamlined approach was, for a while, unhelpfully blank: the July 2025 OECD profile ticked "Other" and left the implementation questions as not applicable. Circular 2026/C/45 of 19 March 2026, an addendum to Circular 2020/C/35, resolved it. Belgium adopts the February 2024 Inclusive Framework report for fiscal years beginning on or after 1 January 2025, but purely as a respect-the-outcome commitment. The approach applies to qualifying transactions between Belgian entities or permanent establishments and distributors, agents or commissionaires resident in OECD-listed covered jurisdictions. A Belgian distributor cannot be the tested party, domestic intra-group transactions are excluded, and relief in MAP or arbitration is accepted only where the counterparty jurisdiction is both covered and a treaty partner. For a group with a Belgian principal and routine distributors in covered markets, that is a genuine simplification; for a group looking to fix a Belgian return, it is nothing at all.
Pillar Two is now the dominant compliance workload. The Law of 19 December 2023, as amended in May 2024 and subsequently, applies a qualified domestic minimum top-up tax and the income inclusion rule to fiscal years beginning on or after 31 December 2023, with the undertaxed profits rule from 31 December 2024, at a 15% minimum rate for groups above EUR 750 million of consolidated revenue in two of the four preceding years. In-scope groups must register with the Crossroads Bank for Enterprises within thirty days of the start of the reporting year through a digitally signed MyMinfin mandate. The near-term dates are firm: the first GloBE information return on 29 June 2026, top-up tax returns on 1 July 2026, and the GIR filing-entity notification extended to 30 September 2026, with guidance in Circulars 2025/C/68 and 2026/C/41.
Litigation risk is concentrated in two places. The excess profit ruling saga continues: the General Court upheld the Commission's State aid decision on 20 September 2023 in Joined Cases T-131/16 RENV and T-263/16 RENV, and on 26 March 2026 Advocate General Kokott went further than the taxpayers had hoped, proposing in Soudal (C-734/23 P), Esko-Graphics (C-735/23 P) and the related appeals that the Court set aside the General Court rulings given in the beneficiaries' favour and confirm the excess profit regime as State aid, while criticising the extension of recovery to group entities. The direction of travel therefore favours the Commission on classification, with the live argument narrowing to who has to repay. And the retroactivity question opened by Ghent in 2021 remains the strongest defensive argument available to any taxpayer facing a DEMPE-flavoured assessment on pre-2017 years.
How practitioners should respond
Four practical priorities follow. First, build the benchmark before the return, not after the letter. Because the local file is filed with the corporate return, a study prepared in response to an audit is by definition late, and the median-adjustment convention means a result sitting just outside the interquartile range is corrected all the way to the middle. Target accordingly, and document why the chosen point in the range is the right one.
Second, defend on Article 49 as well as on price. The Belgian pattern is that the arm's length analysis is won and the deduction is lost anyway, because the expenditure cannot be tied to the acquisition or retention of taxable income. Loan purpose, service benefit and the recipient's actual functions need evidencing in the contemporaneous file, not reconstructed later.
Third, treat the 2025 form generation as a disclosure exercise with consequences. The value-chain analysis in the master file now invites a direct comparison between where profit sits and what the transfer pricing produces, and the local file exposes method choice transaction by transaction and country by country. Inconsistency between the two, or between either and a group's Pillar Two data, is the cheapest audit lead the administration will ever get.
Fourth, use the certainty machinery on its own timetable. The 30 November filing date for transfer pricing rulings, the one-prior-year rollback limit on bilateral APAs, and the requirement to invoke the Law of 2 May 2019 expressly when lodging a dispute complaint are all deadlines that cannot be repaired afterwards. Where a position is genuinely contestable — an HTVI transfer, a principal restructuring, a large intra-group financing — the choice is between paying for advance certainty now and litigating on the administration's timetable later.
