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Transfer pricing regulations

OECD Level

The OECD Model Tax Convention provides a model for Double Tax Treaties. Relating to transfer pricing, the arm’s length principle is generally embodied in article 9 'Associated Enterprises', and article 7 'Business Profits' embodies the attribution of profits to permanent establishments.

The OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (January 2022 edition), or in short the “OECD TP Guidelines”, include detailed guidance and explanations on the arm’s length principle. The goal is providing assistance in the interpretation in national TP laws, regulations and administrative policies in view of obtaining a fair international allocation of tax revenue and to avoid (economic) double taxation. The OECD TP Guidelines is an extensive document with separate chapters covering also specific topics such as financial transactions, intangible property, business restructurings. Please note that the OECD TP Guidelines as such are so-called soft law.


Hard law versus soft law

Hard law refers to legal obligations that are binding on the parties involved and which can be legally enforced before a court.

For example: Belgian Income Tax Code (“BITC92”).

Soft law is used to denote agreements, principles and declarations that are not legally binding. Soft law instruments are predominantly found in the international sphere. Soft law functions as a gap-filler, giving guidance to States and other stakeholders in the absence of binding legal norms. 

For example: OECD TP Guidelines.


  • As the OECD TP Guidelines regularly change over time, make sure you / a tax inspector is using the relevant OECD TP Guidelines for the years under audit

  • Always check the relevant Double Tax Treaty as the OECD Model Tax Convention is a template (that changes regularly over time) and as such not per se represents the content of the Treaty that has been concluded between the relevant jurisdictions

Belgian level

Belgian Income Tax Code (hard law)

The following articles are of importance regarding transfer pricing in a Belgian context

  • Article 185 §2 BITC92: arm’s length principle. The content is equivalent to Article 9, §1 and §2 of the OECD Model Tax Convention

  • Article 26 BITC92: recapture of profits - abnormal or gratuitous benefits granted

  • Article 49 BITC92: deductibility of expenses

  • Article 54 BITC92: deductibility of the payments of interest, royalties and management/services

  • Article 55 BITC92: deductibility of interest paid

  • Article 79 + 207 BITC92: Non deductibility of certain items being made from that part of the profit relating to abnormal or benevolent advantages received / non-deductibility against abnormal and gratuitous benefits received

  • Article 344 §2 BITC92: Disregard of transfer of assets

Transfer Pricing forms (hard law)

Transfer Pricing Circular Letter (soft law)

  • Most relevant: Circular Letter 2020/C/35

  • Other/older Circular Letters available as well

  • Legal value of a Circular Letter
    • Settled case law of the Belgian Court of Cassation and the Courts of Appeal regarding the legal value of (counter)administrative directives is strict and categorically rejects the binding force of administrative circular letters.
    • A circular letter is therefore only binding for the tax authorities by virtue of their hierarchical obedience duty, not for the taxpayer, nor for a judge. So a taxpayer is not obliged to follow a circular letter, and certainly not if the circular letter seems to be contra legem, or wrongly interprets e.g. the OECD TP Guidelines (being soft law itself) (cf. Circular Letter 2020/C/35).
    • For sake of completeness, please note that retroactivity as such is based on strict principles (confirmed by the case law of the Belgian Constitutional Court) in case of legislation. However, royal/ministerial decrees and circular letters cannot be applied in a retro-active way, under the penalty of the infringement of the principles of good administration.
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