As the yearly transfer pricing audit wave was recently released by the Belgian tax authorities, in which Belgian taxpayers receive a (mostly) standardized, extensive request for information, it is a good moment to have a look at some recent developments as well as certain facts and figures linked to transfer pricing audits.

The OECD published today the successor of the July 2017 edition of the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (“OECD TP Guidelines”). This ’January 2022’ edition of the OECD TP Guidelines incorporates:

Further to our previous newsflash regarding the updated transfer pricing country profiles published by the OECD in August 2021, the OECD has released a second batch of updated and new transfer pricing country profiles for 21 countries on 13 December 2021. This brings the total number of countries covered to 63. The updates include, in line with the first batch, two new sections that cover the transfer pricing treatment of financial transactions and the application of the Authorised OECD Approach (AOA) to attribute profits to permanent establishments. The OECD indicated that more updates to the transfer pricing country profiles are expected in the first half of 2022. We will keep you posted on updates.

Did you or your company recently have to deal with a transfer pricing audit? If not, there is a good chance you will be faced with one soon. The number of transfer pricing audits (TP audits) has increased in recent years and the Special Tax Inspectors (BBI/ISI), like real “fraud hunters”, are paying more and more attention to this matter.

On 11 November 2021, the European Parliament approved the implementation of what is commonly referred to as the public country-by-country reporting (CbCR) Directive.¹ This formal approval of the European Parliament came after the recent publication of the position of the European Council.

The Service for Advance Decisions (SAD) indicated, in line with previous years, that prefiling requests or requests that are not preceded by a prefiling, concerning transfer pricing or the innovation income deduction and that relate to the calendar year 2021 (fiscal year 2022), must be filed by 31 January 2022 at the latest.

In a recently published decision dd. 8 June 2021 of the Court of Appeal of Ghent relating to transfer pricing (nr. 2016/AR/455), the Court decided in favor of the taxpayer. The case originated from an audit initiated by the Special Investigation Squad (BBI/ISI) in 2009.

On 3 August 2021, the OECD published several updates with respect to the transfer pricing country profiles. Next to certain profiles being updated, some new country profiles were added. In total, 20 country profiles were updated of which 3 new countries were added, bringing the total number of countries covered to 60. These country profiles include the current state of the countries’ domestic legislation regarding key transfer pricing principles as well as an indication to what extent these rules follow the OECD Transfer Pricing Guidelines. The updates include two new sections, now also covering the transfer pricing treatment of financial transactions and the application of the Authorised OECD Approach (AOA) to attribute profits to permanent establishments. Furthermore, the OECD indicated that updates to the transfer pricing country profiles will be conducted in batches throughout the second half of 2021 and the first half of 2022.

On 8 June 2021, the German tax authorities have published developments relating to transfer pricing regulations in the federal gazette (which are part of the so-called “Act to Modernise the Relief from Withholding Tax and the Certification of Capital Gains Tax”). One of the key points of the legislation includes amendments to the provisions on the arm's length principle under the Foreign Tax Act. With these updates, the German regulations become more aligned with the OECD Transfer Pricing Guidelines regarding specific topics. Furthermore, the updates may have an impact on existing transfer pricing documentation and the scope of intangibles. The updates relating to the arm's length principle will be applicable to income and corporation tax for tax assessment period 2022. More updates are expected at a later stage. Furthermore, we include some observations relating to transfer pricing audits in Germany.

Newsflash from our Dutch colleagues of Atlas (WTS Global member) on the proposal to disallow unilateral downward transfer pricing adjustments.