Tax Controversy and Dispute Resolution Alert
Pricing Knowledge Network Alert
Belgian Service for Advance
Decisions releases 2012 annual
report
September 17, 2013
In brief
In 2012, the Service for Advance Decisions (SAD) issued 550 advance tax decisions (also referred to as
“rulings”), including 97 on transfer pricing (TP). On average, these advance tax decisions took only 67
days from formal filing to decision. The stable volume of decisions demonstrates the success of the
Belgian rulings practice as a powerful instrument for tax risk management, especially considering the
recent and constant increase in in-depth TP audits.
In detail
Belgian rulings practice
Belgium benefits from a mature
and robust rulings practice.
Since 1993, Belgium has
operated a formal rulings
procedure, with the legal basis
for the current, generalised
rulings system introduced in
2002. During 2005, a fully
independent rulings office,
officially called the “Service for
Advance Decisions” (SAD), was
established with dedicated staff
authorised to issue unilateral
binding advance decisions in the
TP area. The SAD’s decisions
are published (in French or in
Dutch) on www.fisconetplus.be
on a no-name basis, with
relevant details but
safeguarding confidentiality.
Also, annual reports are
submitted to Parliament, the
first one covering 2005
(available at www.ruling.be).
The annual report for 2012 has
been made public recently.
These reports are especially
interesting as they also reveal
cases submitted for which no
positive decisions could be
issued – including the reasons
why.
Key statistics
During 2012, some 550
applications for an advance
decision were filed. The SAD
issued 485 positive advance
decisions including 97 on TP
cases, making TP the second
most successful topic. On
average, it took only 67 days to
issue the decisions from the date
the formal application was filed
(often a similar time passes
between the first contact with
the SAD and the formal
introduction of the application).
The SAD’s transparent way of
working explains the relatively
high volume of withdrawn
applications (58 in 2012) and
the very low number of negative
decisions (only 4 in 2012), while
3 applications were not accepted
on formal grounds. The
impressive number of
applications for a pre-filing
meeting (941 in 2012) is proof of
the significant interest shown in
pre-filing discussions. The SAD
has 100 staff members,
excluding the 5 members of the
management board (figures as
at 1 January 2013).
Advance decisions are normally
granted for a period not
exceeding 5 years, a term that
can conditionally be renewed.
www.pwc.com
Tax Controversy and Dispute Resolution Alert
Pricing Knowledge Network Alert
Analysis of transfer pricing
decisions
The rulings are spread over various
sectors and activities. Most of the
transactions for which an application
is filed relate to sales (support)
functions, (management) support
services, financial transactions,
logistic services and business
restructurings.
For the support services and logistic
services, typically the transactional
net margin method (TNMM), with
cost plus as the profit level indicator
(PLI), is put forward as the most
appropriate TP method. It is worth
mentioning that, for sales related
functions, the Berry ratio has been
accepted several times as the TP
method for testing the arm’s length
nature of the transactions. For
financial transactions, often the
comparable uncontrolled price
method (CUP method) is the TP
method applied.
The 2012 annual report also includes
a number of TP cases that were filed
with the SAD, but were considered not
admissible. One such case related to a
disagreement on benchmark results.
Another case lacked a sufficiently
demonstrated business rationale for
the transaction. A further case was
turned into a bilateral ruling
application, because the tax
authorities of the two states involved
held different views on the TP
consequences of a restructuring.
The takeaway
A ruling can be a powerful tax risk
management instrument. By
obtaining a positive decision, certainty
is gained for 5 years (conditionally
renewable) on the arm’s length nature
of an envisaged transaction or
operation. The statistics show the
maturity of the Belgian rulings
practice, with a stable volume of
decisions over recent years.
In our experience, the SAD has proved
to be both effective and willing to
accommodate, within the limits of the
national and international legal
framework, the taxpayer’s search for
upfront certainty.
The opportunity to have a pre-filing
meeting lowers the threshold for filing
a ruling application and allows a
company to test the water on the
acceptability of an envisaged
transaction or operation.
Let’s talk
For more information, please contact:
Transfer Pricing
Isabel Verlinden, Brussels
+32 2 710 4422
[email protected]
Patrick Boone, Brussels
+32 2 710 4366
[email protected]
Xavier Van Vlem, Ghent
+32 9 268 8311
[email protected]
David Ledure, Brussels
+32 2 710 7326
[email protected]
Kris Smits, Antwerp
+32 3 259 3109
[email protected]
René Willems, Brussels
+32 2 710 7324
[email protected]
© 2013 PricewaterhouseCoopers LLP. All rights reserved. In this document, PwC refers to PricewaterhouseCoopers (a Delaware limited liability partnership),
which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.
2
pwc