A First Instance Belgian Court ruled in favour of the Belgian tax authorities in a recently published case. The dispute deals with profit attribution between a Belgian taxpayer and its French permanent establishment (PE). The taxpayer and the tax authorities did not challenge the existence of the PE in itself.
The Court referred to the OECD Transfer Pricing Guidelines, the OECD 2010 Report on the attribution of profits to PE, and Belgian domestic legislation. The Court decided the case by adopting a somewhat novel approach - i.e. the Court interpreted the initial wording of the 1964 tax treaty between Belgium and France by partially adopting the most recent best practices, since the Authorised OECD Approach has been addressed only in a certain extent.
The ruling also covers important aspects of the fundamentals of a transfer pricing analysis: comparability including the functional analysis, transfer pricing documentation (with reference to the burden of proof), selection of the transfer pricing method, and benchmarking analysis