Additional guidelines in view of the Co-Operative Tax Compliance Programme

Flashback to 2018 – What is the CTCP? 

With its launch in 2018 and with the ultimate goal of (i) achieving faster legal certainty for companies and (ii) improving compliance with tax obligations, the Belgian Co-operative Tax Compliance Programme (CTCP) introduced a mindshift, from a reactive tax audit modus to a collaborative, proactive approach based on legitimate expectations between tax authorities and -payers, increased transparency and trust, and faster legal certainty. 

To reach these objectives, the CTCP is built on some key foundations which are are essential for creating an environment of mutual trust between companies and the Large Enterprises (“LE”) Administration:

  • a single point of contact and a follow-up team
  • business knowledge and business-related insight
  • compliance with legal tax obligations and equal treatment in terms of tax
  • tax strategy and planning transparency within authorised legal boundaries
  • proactive notification and transparent communication 
  • presence of a sufficiently solid Tax Control Framework (TCF)
  • faster legal certainty by working in the present
  • a tailored audit strategy 

What’s new?

The Belgian tax authorities have now published (i) an updated version of its initial CTCP brochure, including more details on the programme, as well as (ii) a preparation guide (/checklist) in view of (key) requirements to meet their expectations on having a “well defined” Tax Control Framework. 

Updated CTCP brochure: some key elements

Phased intake of group entities

According to the new brochure and contrary to before, a phased intake of the different Belgian group entities is now explicitly possible, implying not all entities need to be onboarded from the start. This can be done in agreement with the LE Administration, taking into account the business specifics of the different group entities (such as the entities’ structure, activities and size, making use of different ERP systems, having different processes and controls in place or different maturity levels of TCF, etc). 

Moreover, during this phased intake, the entities that are not yet onboarded to the CTCP will already be able to benefit from some CTCP features such as the permanent single point of contact, which will be made available to the entire group from the start of the intake talks. 

Target group – updated thresholds

Originally, the CTCP intake was limited to very large companies (i.e. corporations and other legal entities with an annual turnover (excl. VAT) of more than 750.000.000 EUR or a balance sheet total of more than 1.500.000.000 EUR or more than 1.000 employees (annual average workforce)). Companies just below these thresholds could also be allowed to the program.

The new guidance now explicitly mentions that: “also large companies falling below the above-mentioned thresholds may still apply if they meet the other requirements for participating in the CTCP, such as the implementation of an effective Tax Control Framework.” In our view, this again emphasises the importance of a well-defined and robust Tax Control Framework within the organisation. 

Emphasis on single point of contact

The updated brochure also provides more detail on the permanent single point of contact (i.e. the coordinator) that companies within the CTCP have access to. More specifically, the coordinator can be contacted directly without having to go through the contact centre of the tax authorities. 

Tailored audit strategy

In the updated brochure, more guidance is given on the tailored tax audit strategy which is applicable to companies within the CTCP. More specifically, when a company is selected for a tax audit, the CTCP team will carry out a pre-analysis of the information on file in order to determine the need for and scope of the audit. If the coordinator and follow-up team conclude that based on the information on the file and TCF assessment performed sufficient assurance and information/documentation is available, the tax audit can be closed without any need to contact the company.

The updated brochure now explicitly mentions that in case infringements are spotted during the audit (and/or CTCP), these infringements will be assessed as is the case for companies outside the programme. 

Taxes in scope – Pillar 2

Information exchanges such as transfer pricing documentation requirements, the automatic exchange of financial information and reportable cross-border arrangements were already in scope of the CTCP. The updated brochure now also adds Pillar 2 (i.e. minimum level of taxation for multinational enterprise groups and large domestic groups) to the scope of the CTCP.

A new “checklist”: more guidance on the requirement of having a robust Tax Control Framework

A robust Tax Control Framework (TCF) was already mentioned as a key feature of the CTCP. More specifically, the CTCP is only open to companies:

  • that have a robust tax risk management and control system, also known as a Tax Control Framework (TCF), and
  • who wish to be transparent regarding their scope and effectiveness. 

This makes it possible to objectively analyse and assess a company’s internal risk management. To be effective, the TCF should be an integral part of a comprehensive internal control system. In other words: the TCF plays a substantial role in underpinning the CTCP! 

In the preparation guide, more guidance is given on the building blocks of a robust Tax Control Framework, enabling large companies to make a first “self-assessment” of the maturity of their TCF and to prepare themselves properly in view of the different aspects that will be discussed during the exploratory discussion and intake phase with the Belgian tax authorities. More specifically, the preparation guide dives into the key requirements per building block of a mature Tax Control Framework (in line with the OECD’s guidance for co-operative tax compliance).

For more details, have a look at the updated brochure as well as the preparation guide that is made available on the Belgian FPSF’s website here.