Belgium tax:
New transfer pricing reporting obligations imposed

The Royal Decree of 10 August 2009 (published in the Belgian Official Gazette of 24 August 2009) requires corporations to report certain non-arm's length transactions in the annexes to their annual accounts. In addition, corporations will have to provide certain information regarding off-balance sheet arrangements.


Non-arm's length transactions

The Royal Decree introduces a requirement for corporations to report "material" non-arm's length transactions with related parties in their annual accounts, although the decree does not provide further guidance as what constitutes the "material" character of a transaction. For the meaning of the term "related party," reference is made to the definitions in IAS 24, §9 (as imposed by EC Directive 2006/46).

The type of transactions that need to be reported depends on the nature of the company. A "heavy" reporting obligation applies to:
- Corporations listed on a stock exchange;
- Corporations whose shares are traded on a multilateral trading facility; and
- Corporations that meet more than one of the criteria to be considered a large group under article 16, paragraph 1 of the Belgian Companies Code.

As a matter of principle, these corporations must report all non-arm's length transactions with related parties. However, the Royal Decree provides an exemption for transactions between group members when the subsidiaries involved are wholly owned by a member of the group. For qualifying transactions, the following information must be reported:
- Amounts involved;
- Nature of the relationship with the related parties; and
- Any other information needed to ensure an accurate view of the financial position of the corporation.

A corporation that does not meet any of the above criteria is subject to less stringent reporting requirements: it only has to report direct and indirect transactions between the company and its major shareholders, and between the company and its leadership (e.g. members of the board).


Off-balance sheet arrangements

The Royal Decree requires that corporations report the nature and business purpose of off-balance sheet arrangements (e.g. transactions with special purpose entities) in the annexes to the financial accounts, provided the arrangements are material and the related risks and benefits can influence the assessment of their financial position. In addition, listed corporations, corporations whose shares are traded on a multilateral trading facility and corporations that meet more than one of the criteria to be considered a large group under the Companies Code are required to quantify the financial impact of the offbalance sheet arrangements on their financial position.


Effective date

Both reporting obligations apply to accounting periods starting as from 1 September 2008.

The obligations imposed by the Royal Decree imply that qualifying corporations should be able to demonstrate to their statutory auditors that they were not involved in any "material" non-arm's length transactions. Affected corporations should sufficiently document transactions with related parties and off-balance sheet arrangements, because the executives responsible for and involved in the financial accounts may be held liable for noncompliance with the obligations.