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Belgium Issues Circular on Transfer Pricing Penalties — Orbitax Tax News & Alerts

On 8 February 2019, the Belgian Federal Public Service (SPF) Finance published Circular Letter No. 2019/C/14, which clarifies the application of penalties for failing to fulfill transfer pricing reporting obligations, including in respect of changes introduced by the Royal Decree of 29 June 2018. This includes three penalty tiers depending on the nature of the offense:

  • Type A - an offense due to circumstances beyond the taxpayer's control, in which case no penalty applies;
  • Type B - an offense that is not attributable to bad faith or intent to evade tax, in which case no penalty applies for the first offense and increasing penalties of EUR 1,250 to EUR 25,000 apply for subsequent offenses; and
  • Type C - an offense that is attributable to bad faith or intent to evade tax, in which case a EUR 12,500 penalty applies for the first offense and a EUR 25,000 applies for each subsequent offense.

One of the main points of clarification provided by the Circular is that a person must have been informed of a first offense before the penalty for a second offense would apply. For example, if a person failed to submit a Local file by a 1 October 2018 deadline and subsequently failed to submit a Master file by a 28 February 2019 deadline, the person would only be subject to a EUR 1,250 penalty for a second offense (late Master file) if the notice of the first offense (late Local file) had been sent before 28 February 2019. If the notice had been sent after 28 February 2019, the penalty for a second offense would not apply.

The Circular also clarifies that for each offense type, the first and subsequent offenses are determined separately. For example, if a person's first compliance failure is a type B offense and a subsequent failure is a type C offense, the type C offense is considered a first offense for its type, and therefore a EUR 12,500 penalty would apply.