Circular letter on transfer pricing documentation penalties published

On 8 February 2019, the Belgian tax administration published Circular Letter No. 2019/C/14 (the Circular letter) on the penalties due if a taxpayer did not fulfill its transfer pricing reporting obligations. The Circular letter is an annex to circular letter 2017/c/56 providing further guidance to these transfer pricing reporting obligations.

Previously a penalty could not be imposed upon a first infringement even if the taxpayer was of bath faith. Currently, first infringements as a result of bad faith or the intention to avoid taxes (including the deliberate filing of incomplete or incorrect returns), are sanctioned with a penalty of 12,500 euro. Any subsequent infringement is sanctioned with a penalty of 25,000 euro (basket C infringements). Infringements which are not due to bad faith or without the intention to avoid taxes are sanctioned with a penalty from 1,250 euro to 25,000 euro as of the fifth infringement (basket B infringements). No penalty is due on infringements due to circumstances independent of the will of the taxpayer (basket A infringements).

The Circular Letter clarifies that only infringements in respect of transfer pricing reporting obligations are to be taken into account and that all infringements within one basket must be taken into account globally. If a previous infringement has been sanctioned with a penalty, the amount of the penalty that applies to the subsequent infringement will be a second or subsequent infringement if, at the time of the subsequent infringement the taxpayer had knowledge (receipt of the penalty notice) about the previous penalty issued in the same basket.

The Circular Letter also clarifies that penalties in respect of basket B infringements can only be imposed upon infringements committed after 19 July 2018.  However, Basket C infringements are subject to penalties if the infringement is committed after 8 January 2018. The date of infringement in respect of reports which have not been filed or which, being correct  and complete, have been filed after the expiry of the deadline is the expiry date. However, in case the report is incorrect or not complete the infringement date is the actual date the report has been filed.

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