Summary
- Belgium has published Circular 2026/C/45 as an addendum to Circular 2020/C/35, incorporating the OECD’s Pillar One – Amount B guidance into its transfer pricing framework for routine distribution activities.
- The circular confirms acceptance of the OECD’s simplified and streamlined approach, including the use of a pricing matrix and TNMM as the default method, subject to strict scope conditions and exclusions.
- The rules apply to qualifying intragroup transactions and permanent establishment dealings as from 1 January 2025, with legal certainty conditional on implementation by “covered jurisdictions” and the existence of a tax treaty with Belgium.
Article
On 19 March 2026, the Belgian Federal Public Service Finance published Circular 2026/C/45, an addendum to Circular 2020/C/35, providing detailed guidance on how Belgium will apply the OECD’s Pillar One – Amount B framework within its transfer pricing practice. The circular follows the publication of the OECD’s Pillar One – Amount B report (February 2024) and formally integrates that guidance into the Belgian interpretation of the arm’s length principle for certain routine marketing and distribution activities.
Objective and scope of the addendum
The primary objective of the addendum is to simplify and streamline the application of the arm’s length principle for qualifying intragroup distribution activities, while increasing tax certainty and reducing compliance burdens for both taxpayers and tax administrations. Belgium explicitly confirms that the addendum does not revise the general transfer pricing principles laid down in Circular 2020/C/35, nor does it provide a basis for reinterpreting other OECD Transfer Pricing Guidelines. Those principles remain fully applicable alongside the new guidance.
The simplified and streamlined approach applies exclusively to qualifying intragroup transactions involving routine marketing and distribution of goods, as well as to the allocation of profits to permanent establishments (dealings), provided the transactions fall within the defined scope of Amount B.
Covered jurisdictions and legal certainty
A key concept introduced by the circular is that of the “covered jurisdiction.” Belgium will respect outcomes derived from the simplified and streamlined approach where the counterparty jurisdiction has politically committed to Amount B and has implemented the approach in line with the OECD report. The list of covered jurisdictions is maintained by the OECD and reviewed periodically.
Belgium’s acceptance of the Amount B outcome is conditional upon:
- implementation of the approach in the other jurisdiction’s domestic law,
- consistency of that implementation with the OECD report and its updates, and
- the existence of a double tax treaty between Belgium and the relevant jurisdiction.
Purely domestic Belgian transactions, even if otherwise in scope, are explicitly excluded from the application of the simplified approach.
Qualifying and excluded transactions
The circular follows the OECD report in defining qualifying transactions as:
- marketing and distribution transactions where a distributor purchases goods from related parties for wholesale distribution to unrelated customers; and
- agency or commissionaire arrangements participating in the wholesale distribution of goods.
The Belgian tax administration stresses that functional analysis—functions performed, assets used, and risks assumed—is decisive, rather than qualitative labels. Quantitative thresholds (notably operating expense ratios between 3% and an upper limit set between 20% and 30%, depending on the partner jurisdiction) are used solely as a scoping filter and not as indicators of functional characterisation or arm’s length remuneration.
Several important exclusions apply, including transactions involving unique and valuable contributions, highly integrated risk sharing, services or intangibles, commodities, and cases where distribution activities cannot be reliably priced separately from other non-distribution functions.
Pricing method and pricing matrix
Belgium confirms the Transactional Net Margin Method (TNMM) as the most appropriate default method under the simplified and streamlined approach, while allowing the CUP method where it provides a more reliable result.
Central to the framework is the pricing matrix, which determines the distributor’s return on sales based on:
- sector category, and
- two factor intensities measured over a three-year period (operating assets to sales and operating expenses to sales).
The applicable return must fall within the relevant matrix range, subject to limited flexibility (±0.5%) and potential adjustments through specific OECD-prescribed mechanisms, such as cross-checks based on operating expenses or data availability constraints.
Documentation and dispute resolution
Where existing transfer pricing documentation does not already cover the simplified approach, Belgium recommends that taxpayers explicitly document its application, following the non-exhaustive list of information set out in the OECD report.
In dispute resolution contexts, Belgium may accept Amount B outcomes in mutual agreement or arbitration procedures where both jurisdictions apply the simplified approach. Where one jurisdiction does not apply Amount B, Belgian competent authorities will rely exclusively on the standard OECD Transfer Pricing Guidelines and Circular 2020/C/35.
Entry into force
The guidance applies to transactions performed as from 1 January 2025, providing multinational groups with clarity on Belgium’s position regarding the practical implementation of Pillar One – Amount B.
Conclusion
With Circular 2026/C/45, Belgium aligns itself closely with the OECD’s Pillar One – Amount B framework, signalling a pragmatic approach aimed at reducing controversy for routine distribution arrangements while safeguarding core arm’s length principles. For multinational groups with Belgian operations, the circular underscores the need to reassess existing distribution structures, documentation, and cross-border alignment in light of the new simplified pricing regime.
Source MyMinfin
