1. Treasury Hot TopicTax rulings in Belgium - Secure the tax position of your treasury center www.pwc.com Philippe Dedobbeleer, Belgian Ruling Commission David Ledure, PwC

2. Agenda PART I: Functioning of the Ruling Commission PART II: Flavour of treasury centre rulings www.pwc.com

3. PART I: Functioning of the Ruling Commission 1. Introduction 2. History (in short) 3. Legal provisions 4. Pre filing 5. Formal Demand 6. Figures 7. Guidelines www.pwc.com

4. Introduction 1

5. Organisation February 2011 5

6. History 2

8. 2005: Installation of the Autonomous Office (law: 21 of June 2004) entitled to issue all advance decisions in tax matters (direct and indirect taxation)February 2011 7

9. Legal provisions 3

10. 3. Legal Provisions Advance decision: a legal act whereby the Office for Advance Decisions determines, in accordance with the provisions in force, how the legal provisions will apply to a particular situation or transaction that has not yet produced any fiscal effect. February 2011 9

11. Pre filing 4

13. Is an option - no obligation

14. Can be held with tax advisers on an anonymous base (identity of the applicant is not revealed)

15. Can lead to the introduction of a formal demand (possibly adapted to meet with the remarks made in the meeting)February 2011 11

17. Gives a first impression to the client of the point of view of the Office;

18. The local tax officer is not informed.February 2011 12

20. indicates that it concerns a pre filing

21. Brief description of the intended operation or transaction

22. Indicates the taxes or tax sections concerned February 2011 13

24. Appointment of a coordinator

25. Formation of a team to deal with the issue

26. The team leader is the main contact point

27. The same team deals eventually with the formal demand

28. The allocation depends onthe language of the pre filing request the taxes or sections of taxes involved February 2011 14

30. Informal and constructive atmosphere

31. Is very to the point / useful / practicalFebruary 2011 15

32. Formal demand 5

34. Strong preference for paperless filing (e-mail)

35. Explanations and information in English are accepted – the Office can require translation of relevant items of the formal demand February 2011 17

37. extended motivation;

38. the fact that there is a formal demand going on in an other country or not (duplicate of the formal demand or decision to enclose)February 2011 18

39. 5. Formal Demand It is preferable that the client adds as much as information (documentation, explanations, motivation, …) as possible with the formal demand or with the request of pre filing. That gives the team a clear and clean preview of the operation or transaction. February 2011 19

41. Appointment of a coordinator

42. Formation of a team

43. Team leader = responsible for the demandFebruary 2011 20

45. Communication of the coordinator, team leader and team member(s) to the client.February 2011 21

48. Proposition of a time schedule for the treatment of the demand

49. Possibility to have more than 1 meeting

50. More written info can be required

51. The Office can request an opinion from the central tax administrationFebruary 2011 23

53. Team leader: responsible for the drawing up of the proposition (every team member is responsible for his own part)

54. Coordinator: supervises the team and explains/defends the teams position to the responsible member of the boardFebruary 2011 24

55. 5. Formal Demand The responsible member of the board validates the proposition and defends the proposition at the meeting of the board Target period decision within 3 months February 2011 25

57. In principle: the decisions are taken by unanimous consent

58. Autonomy

59. The chairman/woman has a decisive vote

60. The chairman/woman and a member of the board sign the decision February 2011 26

62. the applicant didn’t comply with the conditions or engagements of the decision

63. modification of the applicable legislation The decision is valid for 5 years (exceptions are possible) February 2011 27

65. The local tax inspector receives a copy for verification of the correct implementation of the decision

66. Publication of the decisions on a no-name base (except: justified requests for non-publication) February 2011 28

67. 5. Formal Demand Areport is presented to theParliamentevery year (anonymity of applicants and parties concerned – statistics - the report is not made public) February 2011 29

68. Figures 6

69. 6. Figures: Requests for pre filing meetings February 2011 31

70. 6. Figures: Formal Demands February 2011 32

71. Guidelines 7

73. Value: indicative. Not binding to the Administration. Only an instrument to facilitate the filing of a demand

74. Published on the website www.ruling.be

75. Evolution

76. Until 30.09.2009: public consultation concerning guide line – drafts on specific topics. February 2011 34

77. Conclusion Collaboration is absolutely necessaryMISSION : To be at service in a quick and flexible way to our clients February 2011 35

78. PART II: Flavour of treasury centre rulings 1. WHT exemption for intra-group financing companies 2. Waiver of NID 3. Waiver of debt 4. Transfer Pricing The subsequent slides represent PWC’s interpretation of some published rulings www.pwc.com

79. WHT exemption for intra-group financing companies 1

83. Part of a group of associated companies

84. Only activities for the benefit of group companies (‘intra-muros’)

85. Services of an exclusively or predominantly financial nature (e.g. lending and borrowing)

86. Only funded by companies for own or group companies’ financing

87. No substantial participations heldFebruary 2011 39

89. Personnel? Financing activities do not necessary need the involvement of many personnel

90. In practice tested via financial indicators (e.g. financial assets / total assets; financial revenue / total revenue).

91. E.g. decisions no. 500.111, 800.304, 800.371, 800.459 and 2010.151February 2011 40

92. Waiver of NID 2

95. E.g. - CFC legislation (e.g. Germany and Italy) - Denial of interest deduction (e.g. Sweden)ParentCo ! CFC ! Non-resident Belgian NIDco ! Interest deduction ! Loan February 2011 Interest payment 42

97. Waived NID is permanently lost

99. Parliamentary question no. 15066 dd. 17/4/2007

100. Circular letter no. Ci.RH421/574.945 dd. 9/10/2008

101. Separate box provided in corporate income tax return

102. Ruling decisions no. 700.306, 700.329, 700.444 , 800.280, 900.234 and 900.472February 2011 43

103. Waiver of debt 3

106. Compensationwithcarried forward taxdeductionsifnotabnormal/gratuitousbenefits (section 207, 2° BITC) February 2011 45

108. Financial engagement of A to B

109. B is still in going concern as a result of engagement of A

111. Compensation of losses in respect of B

112. Tax deductible professional expenses in respect of ABelCo A 100% BelCo B February 2011 46

113. Transfer pricing 4

115. However, if it can be supported by factual elements, such individual credit profile can be influenced by implicit group support.

116. Various pricing sources can be taken into account to determine the credit spread / interest rate (group’s funding transactions, quoted bonds, etc.)Long term financing February 2011 48

118. Credit risk classification based upon ‘CreditModel’ of S&P, from AAA to CCC

119. Ruling indicates credit risk classification takes into account “group solidarity”

120. New affiliates receive the CCC credit rating to start

121. Margin determined based on a yearly average Fair Market Yield Curve (Bloomberg)

122. Each year, the yearly average spreads are updated Long term financingDecision 2010.159 February 2011 49

124. Spreads applied reflect risk profile of borrower.

125. The risk profile is based on a credit scoring model that takes into account:

126. Amount of equity

127. Profitability

128. Debt leverage

129. Importance of operational activities

130. The financial analysis will be based on US GAAP (for US group entities) and IFRS figures (non-US group entities)

131. Scope of the ruling does not cover the decision on the maturity of the credit line (this decision has to be motivated to the local tax inspector).Long term financing Decision 900.185 February 2011 50

133. There are no internal comparables, except the “master account”. Therefore, the spreads are based on the master account conditions.Cash pool activitiesDecision 900.185 cash shortfall: Euribor 1 month + y Bps Participant CPL excess cash : Euribor 1 month - y Bps February 2011 51

135. Administrative support

136. Transfer of insolvency risk

137. Transfer of currency riskX Y Factoring fee = February 2011 52

138. Factoring servicesDecision 900.406 Factoring fee is updated on a yearly basis: [ Reference interest rate + pre-financing margin + Insolvency risk fee ] * (Average Days Outstanding /360) + administration fee of 20Bps February 2011 53

140. Ruling for the payment of a guarantee fee for the formal guarantee provided by XX Other group members of the group Guarantee fee loan Interest payments Formal guarantee For loans or credit lines Bank (L) February 2011 54

143. The various entities are draw from this credit line. All these entities are jointly liable (cross guarantee)

144. A commitment fee is due by the parent company on the total undrawn amount

145. Individual credit limits are determined for each group entity.

146. The commitment fee is recharged (without mark-up) to the various group entities in proportion of their individual credit limits.February 2011 56

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