Selection process

• In the past, the Belgian tax authorities were more or less sailing blind when selecting taxpayers to subject to a transfer pricing audit as only a limited amount of information was available to them. The selection was mainly based on the analysis of tax returns, annual accounts, information picked up in the media or any other public source.
  
  
• More recently, tax authorities worldwide, and also the Belgian tax authorities, are getting in a unique position to perform data-mining techniques and employ software tools to carry out transfer pricing risk-assessment exercises as they now have crucial insights in the more detailed figures and activities of the (Belgian) taxpayers within the framework of the global exchange of information, mandatory transfer pricing documentation (including the Belgian specific local form 275.LF) and country-by-by country reporting.

Triggers (non-exhaustive listing)

• Suffering structural losses, undergoing business restructurings and delocalization of establishments, having a presence in tax havens or low-tax-rate jurisdictions, declining results.
  
  
• Irrespective of the above, all Belgian taxpayers might be subject to a transfer pricing audit with no exception for small and medium-sized enterprises, irrespective of whether the above triggers might have been met.

Likelihood

• The likelihood of being selected for a transfer pricing audit increases each year as the tax authorities are more educated on transfer pricing related matters and accordingly have improved their selection criteria (through optimization of its data-mining techniques) and have more resources available in the sense that (a) the special transfer pricing team has expanded significantly over recent years, (b) inspectors of the Large Companies team, trained by the special transfer pricing team, will be responsible for both transfer pricing and international tax audits and (c) the Special Investigation Squad is also qualified to cover transfer pricing related matters.