Keep calm and make a thorough assessment of the pertinence of the questions and the extent to which you have to address them in detail. The first, formal Request for Information (RFI) initiates the TP audit process. This RFI typically consists of an extensive questionnaire, potentially tailored to some extent on the basis of submitted transfer pricing documentation.
Upon being selected, a taxpayer typically will be warned of a transfer pricing audit being initiated through a formal, written RFI (“vraag om inlichtingen” / “demande de renseignements”) issued by the Belgian tax administration specialized transfer pricing cell. Alternatively, also other audit teams, such as the Large Companies team or the Special Investigation Squad may issue RFIs.
Today, we see two types of (rather extensive) transfer pricing questionnaires being issued to taxpayers:
In our view, when initiating the collection of the information, taxpayers should firstly keep calm when feeling overwhelmed by the general nature of certain questions and their potential reach. Furthermore, taxpayers should bear in mind the following attention points when deciding on the extent and detail provided to the Belgian tax authorities, and act in accordance with what the taxpayer specifically targeted can be knowledgeable of himself:
- Information stands for information, explanation or clarification. In this respect, the Belgian tax authorities are only entitled to ask for explanations on certain transactions. This logically presupposes that the tax authorities must have any knowledge of the transactions before it can ask for explanations. Fishing expeditions, however, are not allowed!
- In principle, questions can only relate to the normal investigation period of 3 years, unless there are indications of tax evasion (then, the investigation period will be extended with 4 years, but subject to prior notice)
- Questions must be targeted for investigating the taxpayer’s tax position
- Reference can only be made to transactions in which the taxpayer has participated
- No information can be requested on non-taxable income or expenditures and costs that have no legal effect
- The questions must be precise as they should not require infinite amount of research on the part of the taxpayer. This is to be assessed on a case-by-case basis.
In the first RFI ordinarily an invitation is included to organize a so-called ‘pre-audit meeting’, which for taxpayers that have an issue with the general and open nature of the questions in combination with the attention points listed above may serve as a means for narrowing down the information to be provided, yet remaining in line with the obligation to cooperate with the Belgian tax authorities. It should be noted that the pre-audit meeting and the reply to the RFI are subject to certain formalities and timing constraints.
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