Get Ready for the 2025 Transfer Pricing Audit Wave!

TP audits target businesses of all sizes, from large multinational corporations to small and mid-sized businesses, irrespective of whether they are subject to mandatory Belgian TP documentation. It is thus critical to properly anticipate and address such audits, whose key features for 2025 are summarized below.

Targeted taxpayers

The BTA's expertise in TP issues has fairly grown over time, enhancing its overall auditing capabilities. Its TP unit has also grown significantly and relies on more sophisticated data mining tools. Overall, the BTA is now able to perform more precise risk assessments to target taxpayers.

The likelihood of being audited increases considerably if the taxpayer:

• presents "red-flag" indicators, e.g. business restructuring(s), major year-end adjustments, volatile sales or profit margins, structural loss-making positions, high debt-to-equity ratios, presence of permanent establishment(s), etc; or
• does not (timely) comply with Belgian TP documentation requirements, i.e. Local File form (275.LF), Master File form (275.MF), and Country-by-country report (275.CBC) or notification form (275.CBC.NOT). In this regard, Belgian TP documentation has been amended as from January 2024 (see our previous newsflash on this topic).

Additionally, the BTA may simultaneously target several taxpayers of a same group to assess the overall consistency of a group’s TP policy (through a coordinated approach).

Audit process

The audit process formally begins with an initial request for information (“RFI”). The RFI generally contains a standard questionnaire that targets (i) all inter-company transactions and (ii) the taxpayer's activities (although more specific questions may be included as appropriate). In principle, 2025 TP audits would cover financial years 2022 and 2023. However, additional information related to the financial year 2024 may also be requested in case of TP adjustments. Audited taxpayers have one month to respond to the RFI, with a possible (one-month) extension if timely requested.

The BTA will also notify targeted taxpayers of a pre-audit meeting. Normally, taxpayers may choose to request such meeting within 10 days of receiving the RFI. However, it seems that the pre-audit meeting is no longer optional in the 2025 version of the TP questionnaire but rather constitutes its first mandatory step.

A pre-audit meeting is essential since it (i) provides the BTA with an overview of how the taxpayer operates within the group from a TP perspective, (ii) enables a possible on-site visit, and (iii) provides an opportunity to answer the taxpayer's questions in preparation for the forthcoming TP audit. A pre-audit meeting should thus be carefully prepared as it will have an impact on the entire audit process. For example, information already provided at this stage by the taxpayer could narrow down the scope of the RFI' questionnaire and thus speed up the whole process.

The initial RFI is generally followed by further extensive requests during the TP audit (e.g. information on transactions, substance, bookkeeping, and other data systems). Taxpayers should also be aware that the scope of a TP audit may have cross-tax implications and extend beyond its initial focus to other tax areas, such as VAT, withholding taxes, corporate income tax, etc.

Implications

Failure to (timely) comply with Belgian TP documentation requirements may result in penalties ranging from EUR 1,250 to EUR 25,000.

Additionally, tax adjustments may also arise from a TP audit in instances where the BTA challenge the relevance of the TP policy implemented (or sanction its absence) and consider that the taxpayer has not accurately declared his profits in Belgium. Such adjustments may result in a minimum taxable basis nearly always coupled with tax increases (10% minimum).

Timely filing and compliance with Belgian TP documentation, alongside the implementation of a strong and consistent TP policy, is thus key to:

• avoiding time-consuming and costly litigations with the BTA (the average TP audit takes between seven and 18 months, depending in the information readily available); and
• properly managing TP risks.

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In case of questions, please do not hesitate to reach out to your regular contact within the Fieldfisher Belgium tax team.