Harmful Tax Practices – 2017 Peer Review Reports on the Exchange of Information on Tax Rulings

Belgium

Belgium has met all aspects of the terms of reference (ToR) for the calendar year 2017 (year in review), except for the timely exchange of information on new entrants benefitting from grandfathered IP regime (ToR I.4.1.3). Belgium is recommended to continue its efforts to identify and exchange information on new entrants to the grandfathered IP regime.

Belgium can legally issue four types of rulings within the scope of the transparency framework.

In practice, Belgium issued 586 past rulings; for the period 1 April 2016 - 31 December 2016, Belgium issued 57 future rulings; and for the year in review, Belgium issued 107 future rulings.

Peer input was received from four jurisdictions in respect of the exchanges of information on rulings received from Belgium. The input noted that information was in the correct format, complete and timely. One peer noted technical issues experienced in the format of attachments to information received. Belgium indicated that they have attempted to resolve this issue on a bilateral basis.

Introduction

113.  This peer review covers Belgium’s implementation of the BEPS Action 5 transparency framework for the year 2017. The report has four parts, each relating to a key part of the ToR. Each part is discussed in turn. A summary of recommendations is included at the end of this report.

A. The information gathering process

114.  Belgium can legally issue the following four types of rulings within the scope of the transparency framework: (1) rulings related to preferential regimes;1 (2) cross-border unilateral advance pricing agreements (APAs) and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles; (3) downward adjustments; and (4) permanent establishment rulings. These rulings are published in an anonymised way.2

115.  In Belgium, there are four services that issue rulings within the scope of the transparency framework: the international relations department, two non-resident taxpayers services offices (a centralised and specialised division in Brussels, Centrum Buitenland, and the Polyvalent Center Eupen), the Ruling Commission and the transfer pricing unit of the tax audit and compliance management office.

Past rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1, I.4.2.2)

116.  For Belgium, past rulings are any tax rulings within scope that are issued either: (i) on or after 1 January 2014 but before 1 April 2016; or (ii) on or after 1 January 2010 but before 1 January 2014, provided they were still in effect as at 1 January 2014.

117.  In the prior year peer review report, it was determined that the Belgian tax administration’s undertakings to identify past rulings and all potential exchange jurisdictions were sufficient to meet the minimum standard. The Belgian tax administration’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Future rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1)

118.  For Belgium, future rulings are any tax rulings within scope that are issued on or after 1 April 2016.

119.  In the prior year peer review report, it was determined that the Belgian Tax Administration’s implementation of a new system to identify future rulings and all potential exchange jurisdictions was sufficient to meet the minimum standard. The Belgian Tax Administration’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Review and supervision mechanism (ToR I.4.3)

120.  In the prior year peer review report, it was determined that the Belgian Tax Administration’s review and supervision mechanism was sufficient to meet the minimum standard. The Belgian Tax Administration’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Conclusion on section A

121.  Belgium has met all of the ToR for the information gathering process and no recommendations are made.

B. The exchange of information

Legal basis for spontaneous exchange of information (ToR II.5.1, II.5.2)

122.  Belgium has the necessary domestic legal basis to exchange information spontaneously. Belgium notes that there are no legal or practical impediments that prevent the spontaneous exchange of information on rulings as contemplated in the Action 5 minimum standard.

123.  Belgium is a party to international agreements permitting spontaneous exchange of information, including (i) the Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011) (“the Convention”), (ii) the Directive 2011/16/EU with all other European Union Member States and (iii) double tax agreements in force with 43 jurisdictions.3

Completion and exchange of templates (ToR II.5.3, II.5.4, II.5.5, II.5.6, II.5.7)

124.  In the prior year peer review report, it was determined that the Belgian Tax Administration’s completion and exchange of templates was sufficient to meet the minimum standard. Belgium therefore continues to meet the minimum standard in this regard. Furthermore, in February 2018, Belgium enhanced the link between the XML tool and the application used for the international exchange, so that rulings are now instantaneously transmitted to the Competent Authority for exchange as soon as they are registered. This ensures a faster transmission of rulings to the Competent Authority and therefore swifter exchanges with partner jurisdictions in the future. Belgium does not currently use the internal FHTP suggested guidance in the completion of the summary section of the template, but provides information for a country to evaluate the possible impact of the ruling. For transfer pricing rulings, this includes information on the transaction(s), the transfer pricing method use, the mark up and the function of the Belgian taxpayer. For other rulings, a summary of the facts and information regarding how the taxpayer will be treated for tax purposes in Belgium is provided.

125.  For the year in review, the timeliness of exchanges is as follows:

 

Past rulings in the scope of the transparency framework	Number of exchanges transmitted by 31 December 2017	Delayed exchanges
		Number of exchanges not transmitted by 31 December 2017	Reasons for the delays	Any other comments
	248	0	N/A	These 248 exchanges include 246 delayed exchanges from the previous year peer review and 2 exchanges with new Inclusive Framework members that joined in 2017.
Future rulings in the scope of the transparency framework	Number of exchanges transmitted within three months of the information becoming available to the competent authority or immediately after legal impediments have been lifted	Delayed exchanges
		Number of exchanges transmitted later than three months of the information on rulings becoming available to the competent authority	Reasons for the delays	Any other comments
	554	0	N/A
Total	802	0

 

Follow up requests received for exchange of the ruling	Number	Average time to provide response	Number of requests not answered
	14	28 days	N/A

Conclusion on section B

126.  Belgium has the necessary legal basis for spontaneous exchange of information, a process for completing the templates in a timely way and has completed all exchanges on time. Belgium has met all of the ToR for the exchange of information process and no recommendations are made.

C. Statistics (ToR IV)

127.  The statistics for the year in review are as follows:

 

Category of ruling	Number of exchanges	Jurisdictions exchanged with
Rulings related to preferential regimes	13	Canada, China (People’s Republic of), Denmark, France, Italy, Japan, Luxembourg, Netherlands, Sweden, Singapore, United Kingdom
Cross-border unilateral advance pricing arrangements (APAs) and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles	757	Argentina, Australia, Austria, Brazil, Bulgaria, Canada, Chile, China (People’s Republic of), Colombia, Czech Republic, Denmark, Estonia, Finland, France, Gabon, Germany, Greece, Hong Kong (China), Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Kazakhstan, Korea, Latvia, Lithuania, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Russia, Singapore, Slovak Republic, Slovenia, South Africa, Sweden, Tunisia, Turkey, United Kingdom, United States, Viet Nam
Cross-border rulings providing for a unilateral downward adjustment to the taxpayer’s taxable profits that is not directly reflected in the taxpayer’s financial / commercial accounts	0	N/A
Permanent establishment rulings	117	Australia, Austria, Bulgaria, Canada, Denmark, Estonia, Finland, France, Germany, Greece, Ireland, Israel, India, Italy, Japan, Luxembourg, Norway, Poland, Portugal, Romania, Singapore, Sweden, United Kingdom, United States
Related party conduit rulings	N/A	N/A
De minimis rule	N/A	N/A
IP regimes: total exchanges on taxpayers benefitting from the third category of IP assets, new entrants benefitting from grandfathered IP regimes; and taxpayers making use of the option to treat the nexus ratio as a rebuttable presumption	1	N/A
Total	8881

1. There were 802 exchanges as defined under footnote 13 of the Terms of Reference. The total of number of exchanges given in this table is higher than 802 due to the fact that some exchanges fall under more than one category of ruling.

D. Matters related to intellectual property regimes (ToR I.4.1.3)

128.  Belgium has an intellectual property regime that is subject to transparency requirements under the Action 5 Report (OECD, 2015) (the Innovation Income Deduction). It states that the identification of the benefitting taxpayers will occur as follows:

• New entrants benefitting from the grandfathered IP regime: For taxpayers filing tax returns in calendar year 2017 (regarding tax year 2016), Belgium introduced a new requirement in the tax return form for taxpayers to identify as new taxpayers not previously benefitting from the regime. This requirement involves a simple check-the-box election that allows the tax administration to conduct further analysis after the tax assessment procedure. The 2017 tax return is able to identify all new taxpayers that entered the regime between 1 January 2016 - 30 June 2016. The 2017 return is also able identify new taxpayers that entered the regime in between 6 February 2015 - 31 December 2015, and continued to remain in the regime in 2016. However, due to administrative and time constraints, the 2016 tax return was not amended in time to include the check-the-box election, and therefore taxpayers that entered and exited the regime between 6 February 2015 - 31 December 2015 are not be reflected in the 2017 tax return. However, it is recognised that the likelihood of taxpayers entering the regime to enjoy benefits for a period of less than 10 months is low and the benefit to be obtained from such a limited period would be minimal. Therefore, the majority of taxpayers benefitting from the grandfathered regime would be continuing to benefit in 2016 and identified in the 2017 tax return. Belgium is recommended to continue its efforts to identify and exchange information on new entrants to the grandfathered IP regime, specifically with respect to taking mitigating steps to exchange relevant information on taxpayers entering and exiting the regime in 2015, should it become aware of such new entrants in the course of tax audits or investigations.

• However, new assets of existing claimants benefitting from the grandfathered IP regime from 6 February 2015 - 30 June 2016 were not identified in the same way via the tax return process, and therefore Belgium is currently examining alternative approaches to capture this information. Belgium cites difficulty in obtaining this information absent a formal investigation, but is intending to instruct tax auditors currently conducting investigations to collect the necessary information in relation to new assets in order to appropriately exchange for new entrants benefitting from the grandfathered IP regime. Belgium further notes that assets obtained from related parties were prohibited from entering the grandfathered regime from 1 January 2016 onwards. Belgium is recommended to continue its efforts to identify and exchange information on new entrants to the grandfathered IP regime, specifically with respect to new IP assets of existing taxpayers.

• Information regarding new taxpayers benefitting from the grandfathered regime was required to be filed in the 2017 tax return by the annual due date of 30 September 2017. The Belgian tax assessment procedure for the 2017 tax returns was finalised by the annual due date of 30 June 2018, whereby 155 taxpayers were identified as having made the check-the-box election as new taxpayers to the grandfathered regime between 6 February 2015 - 30 June 2016. The Belgian Tax Administration will subsequently analyse and verify the accuracy of the taxpayers’ self-elections by conducting further investigations and seeking information regarding relevant exchange jurisdictions as necessary. Once this verification procedure is completed, Belgium will be able to exchange information on new taxpayers benefitting from the grandfathered regime. It is noted that the timeframe in which Belgium will conduct these exchanges is likely to exceed the timeframes required under the transparency framework. Belgium is recommended to continue its efforts to identify and exchange information on new entrants to the grandfathered IP regime, specifically with respect to the timely exchange of information on new entrants.

• Furthermore, there were four rulings granted in 2017 for new entrants benefitting from the grandfathered IP regime. Two of these four rulings were cross-border and exchanged with the relevant exchange jurisdictions, one in in 2017 and one in 2018.

• Third category of assets: not applicable, as this option has not been incorporated into Belgium’s IP regime.

• Taxpayers making use of the option to treat the nexus ratio as a rebuttable presumption: Belgium confirms that no taxpayer elected to treat the nexus approach as a rebuttable presumption.

129.  Belgium is recommended to continue its efforts to identify and exchange information on new entrants to the grandfathered IP regime (ToR I.4.1.3).

Summary of recommendations on implementation of the transparency framework

 

Aspect of implementation of the transparency framework that should be improved	Recommendation for improvement
Belgium has not exchanged all information on new taxpayers benefitting from the grandfathered IP regime, and new assets of existing taxpayers benefitting from the grandfathered regime as this information was not able to be collected during the year in review.	Belgium is recommended to continue its efforts to identify and exchange information on new entrants to the grandfathered IP regime.

References

OECD (2017), BEPS Action 5 on Harmful Tax Practices – Terms of Reference and Methodology for the Conduct of the Peer Reviews of the Action 5 Transparency Framework, OECD/G20 Base Erosion and Profit Shifting Project, OECD, Paris. www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparencyframework.pdf.

OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. https://doi.org/10.1787/9789264241190-en.

OECD/Council of Europe (2011), The Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264115606-en.

Notes

← 1.  Patent income deduction, tax shelter regime for maritime exploitation and excess profits.

← 2.  Available at: www.ruling.be/telechargement/decisions (accessed 19 November 2018).

← 3.  Andorra, Argentina, Australia, Brazil, Belize, Canada, Chile, China (People’s Republic of), Congo, Democratic Republic of the Congo, Egypt, Gabon, Georgia, Hong Kong (China), Iceland, India, Indonesia, Israel, Japan, Korea, Kazakhstan, Malaysia, Mauritius, Mexico, Mongolia, New Zealand, Nigeria, Norway, Pakistan, Russia, San Marino, Senegal, Singapore, Seychelles, South Africa, Sri Lanka, Thailand, Tunisia, Turkey, Ukraine, United States, Uruguay and Viet Nam.