The Belgian Federal Public Service (SPF) Finance published Circular Letter No. 2019/C/14, which clarifies the application of penalties for failing to fulfill transfer pricing reporting obligations.
The Penalty Range
The SPF set up three penalty tiers depending on the nature of the offense. Type A is an offense due to circumstances beyond the taxpayer’s control, in which case no penalty applies. Meanwhile, type B and C, are for the infringement due to the bad faith performed by the taxpayer. Type B is an offense that is not attributable to bad faith or intent to evade tax, in which case no penalty applies for the first offense and increasing penalties of EUR 1,250 to EUR 25,000 apply for subsequent offenses. Type C is an offense that is attributable to bad faith or intent to evade tax, in which case a EUR 12,500 penalty applies for the first offense and a EUR 25,000 applies for each subsequent offense.
The penalties in respect of type B offenses can only be imposed for an offense committed after 19 July 2018. However, type C offenses are subject to penalties if the infringement was committed after 8 January 2018.
The circular clarifies that a person must have been informed of a first offense before the penalty for a second offense would apply. For example, if a person failed to submit a Local file by the 1 October 2018 deadline and subsequently failed to submit a Master file by the 28 February 2019 deadline, the person would only be subject to a EUR 1,250 penalty for a second offense (late Master file) if the notice of the first offense (late Local file) had been sent before 28 February 2019. If the notice had been sent after 28 February 2019, the penalty for a second offense would not apply.
In addition, the circular also governs that to determine the type of the infringement, the first and subsequent offenses are determined separately. For example, if a person’s first compliance failure is a type B offense and a subsequent failure is a type C offense, the type C offense is considered a first offense for its type, and therefore a EUR 12,500 penalty would apply.