In recent years, transactions involving intellectual property (IP) have been subject to increased scrutiny in Belgium, leading to a number of court cases addressing DEMPE functions and the reallocation of income. A recent judgment concerning royalty payments for the use of a trade name provides further guidance on the framework applicable to such payments for Belgian tax purposes.
In this contribution, we first summarise the key elements of the case, followed by a brief overview of the Belgian and international transfer pricing (TP) framework applicable to trade name royalties, as well as key takeaways for practice based on this and earlier case law. This text provides a short summary of our more extensive article published with IBFD, entitled “Belgian court rejects tax authorities’ use of transfer pricing principles to deny deduction of royalty for trade name use”.
Conclusion
This recent ruling confirms – in line with earlier case law – that the BTA cannot rely on broad, principle-based OECD notions regarding trade name use to fully deny the deductibility of related royalties. It underscores that a trade name may carry significant commercial value for group entities and that its use would generally warrant appropriate remuneration.
The decision further illustrates that royalty payments may be assessed under both the TP provisions in articles 26 and 185(2)(a) ITC and the general deductibility rule in article 49 ITC. While these frameworks pursue different objectives and apply distinct evidentiary standards, they may interact in practice.
More broadly, the ruling forms part of a wider trend of increased scrutiny, both in Belgium and internationally – of intercompany trademark and IP royalty arrangements.
