Last year, the tax authorities demanded a record 90 million euros in taxes back from multinationals that channeled profits out of Belgium. The tax authorities announced this week they were involved in a lawsuit with the car manufacturer Opel Belgium over profits dating back to 2008 and 2009, the years just before the closure of the company’s Antwerp plant. According to the tax services, profits from the factory were incorrectly transferred to the head office in Germany at the time. The tax officials opened the Opel file at the end of 2010.
Now, more than previously, Belgium’s tax officials are disputing the transfer of profits by the Belgian subsidiaries of multinationals to their company headquarters, which are located in countries where the tax rate is usually lower.
The investigations into these international cash shifts are in the hands of the Ministry of Finance’s specialised Transfer Pricing Unit. Last year, this unit handled 132 files and claimed more than 89.74 million euro in taxes from the targeted multinationals. Over the past three years, the tax authorities have opened 419 files against multinationals, claiming 202 million euro in unpaid taxes.
The investigations into these international cash flows are in the hands of our tax authorities’ specialised Transfer Pricing Unit. Last year, this unit handled 132 files and claimed more than 89.74 million euros in taxes from the targeted multinationals. That is more than the years before. Over the past three years, the tax authorities have started 419 files against multinationals, claiming 202 million euros in taxes.
According to professor of tax law Luc De Broe (KU Leuven), the control cell is better armed today than it used to be. “They are much more adept at finding weaknesses in the organisation of the multinational. The companies also have to give more information. That explains why there are more controls, which lead to more profit corrections,” says De Broe.
This situation gives rise to the question of double taxation: should the profit be taxed in Belgium or in another country? “If these profits are also taxed in our country, a double taxation arises. Then there is not only a dispute with the companies involved in the group, but also with the tax administration of the other country,” says De Broe.
The professor continues: “Those disputes with the tax authorities are always a missed opportunity for the multinational. It would have been better if they had first made an agreement about it with Belgium’s federal tax authority.” In 2016 alone, more than a thousand agreements were made in Belgium between multinationals and the tax authorities, the highest number in the EU.
Among the multinationals targeted, there is a legitimate concern because the tax authorities are retroactively assessing the profits for the period before 2015, using the OECD’s new rules, which only went into effect in 2015, as their guideline. From 2015 on, a company will be more inclined to conclude a settlement with the tax authorities because the rules are in place. For profits earned before then, there is less readiness to do so and disputes arise.
The tax authorities cannot say which multinationals they are investigating. But Google Belgium already revealed in its annual report that the tax authorities carried out an audit of the internet giant in 2016.