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Belgium - DEMPE - BE: Court of Appeal (Ghent), 8 June 2021, No. 2016/AR/455The Belgium Court of Ap

The Belgium Court of Appeal in Ghent ruled in favor of the taxpayer in a complicated transfer pricing case involving intangibles. The court specifically addressed whether the OECD Transfer Pricing Guidelines (TPG) could be applied retroactively in interpreting and enforcing the arm's length principle.


According to the Court, for applying Articles 26 of the Belgian Income Tax Code and 9 of the Double Tax Treaty, the tax administration must demonstrate through functional analysis if the taxpayer granted an abnormal or benevolent advantage. The court stated that the latest version of the OECD TPG can be utilized only if it offers clarifications without expanding the guidelines' scope. As the guidelines relating to the DEMPE concept and hard-to-value intangibles were detailed only in the 2017 OECD TPG, the court deemed only the 1995 OECD TPG relevant for evaluating transactions in 2009.


Belgian law does not consider the non-retroactive application of the law as an overriding principle. The Court of Appeal emphasized that the DEMPE concept is not just a clarification and therefore cannot be applied retroactively, under the principle of legal certainty when assessing the arm's length nature of intercompany transactions.


The tax administration still has the option to appeal the decision to the Supreme Court and contest the Court of Appeal's legal reasoning.

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