This judgment is not fully final. The Court decided the transfer pricing question on the merits but stayed proceedings on the Article 207(7) WIB92 deduction prohibition pending a ruling by the Belgian Constitutional Court on referred questions. A further judgment will follow. This FT Case covers the decided transfer pricing elements.
The facts
J.F.F.H. BV (the Taxpayer) is a Belgian holding company incorporated in November 2017 by its UK parent, J.I.F. Ltd. (JIFL), part of an Indian multinational group. The Taxpayer was established specifically to acquire and hold nv I., a Belgian operating company active as a trader in spices.
In February 2018, the Taxpayer acquired the shares of the intermediate holding above nv I. for approximately €16 million. That intermediate holding was subsequently absorbed via a tax-neutral merger, making nv I. a direct subsidiary of the Taxpayer. The acquisition was financed through two loans taken on the same day — 23 February 2018: an ING investment credit of €5,750,000 at a variable rate of 1.75 per cent; and an intercompany loan from JIFL (the ICO loan) at a fixed rate of 5 per cent.
The Taxpayer stated during the audit and the administrative objection hearing that 5 per cent was the standard rate applied to all intercompany loans across the group, regardless of the specific characteristics of each transaction. The disputed assessments covered corporate income tax years 2020 and 2021.
The Tax Administration issued notices of assessment amendment in November 2022, applying the internal CUP method using the ING loan as the comparable uncontrolled transaction. After partial concessions on the fixed/variable rate adjustment and the bullet repayment spread, the Tax Administration’s final benchmark rate was 3.32 per cent, built up from the ING variable rate of 1.76 per cent plus adjustments of +0.79 per cent (variable to fixed), +0.25 per cent (subordinated character of the ICO loan) and +0.53 per cent (bullet repayment). The difference between 5 per cent and 3.32 per cent was disallowed as a deductible business expense under Article 55 WIB92, and a 10 per cent penalty surcharge was imposed for an incorrect filing.
The litigation
Tax Administration — assessment and objection (2022–2023)
During the audit the Taxpayer could provide no specific justification for the 5 per cent rate beyond confirming it was the group standard. The Tax Administration applied the internal CUP method using the ING loan as the reference. Following the Taxpayer’s objection and partial concessions in its favour, the Tax Administration maintained its 3.32 per cent benchmark and confirmed the disallowance. The administrative objection was dismissed in November 2023.
The Taxpayer’s two transfer pricing reports argued: that no internal CUP was available because the ING loan and the ICO loan differed on too many points; that the correct credit rating for the Taxpayer was at most BB-, justifying a materially higher subordination spread; and that an external CUP analysis produced an arm’s length range of 4.69 per cent–7.32 per cent with a point estimate of 6 per cent, placing 5 per cent comfortably within range. The Taxpayer also pointed to RABOBANK facility agreements with JIFL as indicative of the group’s external borrowing cost.
Court of First Instance, Antwerp — arm’s length issue decided (June 2025) · authority prevails
The Court upheld the Tax Administration’s position in full on the arm’s length rate question. The ING loan and the ICO loan shared the same borrower, the same start date (23 February 2018), the same purpose (acquiring the shares of nv I.), the same seven-year term, the same currency, and amounts of €5,750,000 and €5,818,195 respectively. The only structural differences — fixed versus variable rate, bullet versus amortising repayment, and subordinated versus senior character — were precisely the adjustments the Tax Administration had applied. The Taxpayer’s report, which had concluded that no internal CUP was available, was therefore proceeding from a false premise.
On credit quality: the Court accepted the Tax Administration’s creditworthiness assessment as objectively sound and unrebutted. The underlying asset — the shareholding in nv I. — was a profitable business generating average post-tax profits of over €1.5 million per year and had paid €5 million in dividends to the Taxpayer in the first two years post-acquisition. The risk of default was minimal, supporting a low credit spread rather than the BB- rating argued by the Taxpayer.
On external CUP and RABOBANK comparisons: having established that a valid internal CUP existed and had been correctly applied, the Court did not need to engage with the Taxpayer’s external range or parent-level borrowing costs. The 5 per cent rate, charged in February 2018 when even the Belgian average consumer credit rate for fixed-term loans over five years was below 5 per cent (4.69 per cent), was not arm’s length.
On the burden of proof: under Article 55 WIB92, the obligation lies on the taxpayer to demonstrate that the rate paid does not exceed the market rate. The Taxpayer had not discharged that burden. The 10 per cent penalty surcharge under Article 444 WIB92 was upheld: even good faith does not preclude it.
Article 207(7) WIB92 — proceedings stayed pending Constitutional Court
The Taxpayer had sought, in the alternative, to have the Article 207(7) WIB92 deduction prohibition — which prevents interest disallowed under Article 55 from being offset against certain tax attributes — reduced or referred. The Antwerp Court of Appeal had referred questions on the constitutionality of this provision to the Constitutional Court in June 2024 (case 2023/AR/308). The Court of First Instance stayed proceedings on this element pending that ruling. No timeline has been indicated.
ajiho commentary
The internal CUP case — why it succeeded where external CUP failed
The Tax Administration’s position was straightforward and the Court accepted it without difficulty. The ING loan and the ICO loan shared the same borrower, the same date, the same purpose, the same currency, the same amount within a rounding margin, and the same maturity. The only differences — fixed versus variable rate, bullet versus amortising repayment, subordinated versus senior — are exactly the kind of differences that comparability adjustments are designed to address. The Tax Administration made those adjustments, and they were reasonable.
The Taxpayer’s transfer pricing reports started from the position that no internal CUP existed. That argument could not survive a side-by-side comparison of the two loans. OECD Chapter X paragraph 10.80 is clear that where an internal CUP is available, it is generally the most reliable method for pricing intercompany financial transactions. A taxpayer that bypasses the internal CUP — or argues it away — and proceeds directly to an external database analysis takes on a significant evidential burden. Here that burden was not discharged.
The group standard rate — a recurring audit trigger
The Taxpayer’s admission during the audit that 5 per cent was the standard rate applied to all intercompany loans across the group, without regard to the specific characteristics of each transaction, was damaging and arguably decisive. It confirmed the Tax Administration’s central argument before any analysis began: that the rate had not been set by reference to the arm’s length principle at all, but by reference to internal convenience. A group-wide standard interest rate applied uniformly regardless of currency, term, credit quality, or instrument type will fail the arm’s length standard in most jurisdictions.
Credit quality and the underlying asset
The Taxpayer argued for a BB- credit rating, which would have supported a materially higher spread. The Court rejected this on the facts. The shareholding in nv I. was performing strongly, generating stable profits and substantial dividend flows. This reflects a broader principle well established in OECD Chapter X: the credit quality analysis for an intercompany loan should be grounded in the actual financial position of the borrower and the value of the underlying security, not in a theoretical or conservative rating estimate that ignores real economic substance.
What this means for your business
The internal CUP exists whether you use it or not. If your group has taken external financing on comparable terms to an intercompany loan — same borrower, same purpose, same period, similar amount and maturity — that external transaction is an internal CUP. Before reaching for database-driven external CUP ranges, groups should map their own financing and assess whether any of those transactions are comparable to the intercompany arrangements being priced.
Standard group rates are a red flag. If your group applies a single intercompany interest rate across all related-party loans regardless of the specific characteristics of each transaction, that policy needs to be reviewed. Every intercompany loan should be priced by reference to its own amount, currency, term, security, seniority, and the credit quality of the borrower at inception.
The burden of proof in Belgium is on the taxpayer. Article 55 WIB92 places the obligation on the taxpayer to demonstrate that the rate paid does not exceed the market rate. Documentation needs to be contemporaneous, transaction-specific, and capable of withstanding a comparison to any available internal benchmark.
Watch the Article 207(7) WIB92 question. The Constitutional Court proceedings on whether the deduction prohibition is proportionate remain open. This is worth monitoring for any group with Belgian entities where Article 55 adjustments have been made or are in progress.
Case reference
J.F.F.H. BV v Belgische Staat (Federale Overheidsdienst Financiën) · Rechtbank van eerste aanleg Antwerpen, afdeling Antwerpen, Kamer AFi1 · Case reference 24/973/A · 16 June 2025
Judgment in Dutch. Belgian first-instance tax judgments are not systematically published on a free official portal. Access via Belgian legal databases (Monkey.be, Jura, Strada lex).