By Bram Markey (Director, Transfer Pricing, PwC Belgium)
The Large Enterprises Division of the Belgian tax administration has announced the launch of a two-year pilot project aimed at transforming the traditional approach of ex-post tax investigations towards a system of proactive, real-time, and constructive dialogue on corporate tax affairs.
The Cooperative Tax Compliance Program will be open for very large enterprises and participation is on a voluntary basis. The program applies to companies subject to the Belgian corporate income tax with:
- Revenue of EUR750m or more;
- Balance sheet total EUR1.5bn or more;
- Over 1,000 staff.
It is not clear if the above thresholds are cumulative or whether meeting only one of the criteria makes a company eligible for the program. A mandatory all-in or all-out principle will apply to the Belgian entities and branches of groups based on the consolidation rules.
In addition to the above, taxpayers must satisfy other conditions to be eligible for the program. These are: taxpayers filed timely tax returns in the past; taxpayers did not engage in tax evasion; taxpayers did not contravene tax law or demonstrate major shortcomings in the last three years; taxpayers paid all taxes due; and taxpayers have a robust “Tax Control Framework” in place.
Presently, the Government does not intend to take a legislative initiative to implement the program and participation will be formalized through an agreement between the taxpayer and the LE Division.
Taxpayers will get a single point of contact (coordinator) within the LE Division. The coordinator will refer and coordinate technical matters (in real time) to the specialists of the LE Division where needed (for instance, transfer pricing and withholding tax). The coordinator and/or specialist will deal constructively with the matters taking into consideration corporate and business insights and will invest in developing industry specific or company specific knowledge.
Participation in the program does not imply that taxpayers will get a more beneficial tax treatment. All rights and obligations based on national and international legislation remain fully applicable. Although the program is aimed at reducing disputes through real-time and constructive dialogue, enterprises and the LE Division can agree to disagree under the program. In this context, in-depth tax audits remain possible.
Compliant enterprises participating in the program can, however, expect to receive a lower risk profile with a corresponding impact on the degree of audits. From a procedural point of view, it is not clear how the proactive and extensive information sharing by the enterprise impacts or interplays with international (automatic) exchange of information mechanisms.
As it currently stands, it is uncertain if the program will grant the same level of legal certainty on tax positions as a formal advance decisions (rulings) or advance pricing agreements (APAs).
Entry into force
The program will start at the end of 2018. Successful preliminary discussions with qualifying taxpayers will lead to a more formal intake process if both the taxpayer and the LE Division consider that the program will come to fruition. The period for the intake process is anticipated to vary from six months to one year.
The LE Division is in the process of contacting potential candidate taxpayers to test appetite for joining the program. Interested taxpayers meeting the profile and criteria may consider applying spontaneously for the program.
Note: The LE Division has not published details on the program till date. The information above is, therefore, subject to change.