The European Commission has concluded that selective tax advantages granted by Belgium under its ‘excess profit’ tax scheme are illegal under EU state aid rules.
The European Commission has concluded that selective tax advantages granted by Belgium under its ‘excess profit’ tax scheme are illegal under EU state aid rules. The EC, which opened its investigation in February 2015, says the ruling has benefited at least 35 multinationals, mainly from the EU, which must now return unpaid taxes to Belgium – and estimates that estimated €700m will be recovered.
Since 2005, the Belgian excess profit tax regime allowed certain multinational group companies to pay substantially less tax in Belgium on the basis of the tax rulings. The EC says the scheme reduced the corporate tax base of the companies by between 50% and 90% to discount for so-called ‘excess profits’ that allegedly result from being part of a multinational group. It found that this derogated from normal practice under both Belgian company tax rules and the arm’s length principle.
EC competition policy commissioner Margrethe Vestager said: ‘Belgium has given a select number of multinationals substantial tax advantages that break EU state aid rules. It distorts competition on the merits by putting smaller competitors who are not multinational on an unequal footing. There are many legal ways for EU countries to subsidise investment [but] if a country gives certain multinationals illegal tax benefits that allow them to avoid paying taxes on the majority of their actual profits, it seriously harms fair competition in the EU, ultimately at the expense of EU citizens.’
In a statement, Belgium’s minister of finance, Johan Van Overtveldt, responded: ‘We now await the outcome of further negotiations with Europe regarding possible reimbursements. If Europe should decide that a reimbursement needs to be made, the consequences for the companies concerned would be considerable and … particularly complex. The course of these negotiations will determine our stance in this matter. At this point, we do not exclude any option. This also applies to the possibility of an appeal against the decision.’
The European Commission has concluded that selective tax advantages granted by Belgium under its ‘excess profit’ tax scheme are illegal under EU state aid rules.
The European Commission has concluded that selective tax advantages granted by Belgium under its ‘excess profit’ tax scheme are illegal under EU state aid rules. The EC, which opened its investigation in February 2015, says the ruling has benefited at least 35 multinationals, mainly from the EU, which must now return unpaid taxes to Belgium – and estimates that estimated €700m will be recovered.
Since 2005, the Belgian excess profit tax regime allowed certain multinational group companies to pay substantially less tax in Belgium on the basis of the tax rulings. The EC says the scheme reduced the corporate tax base of the companies by between 50% and 90% to discount for so-called ‘excess profits’ that allegedly result from being part of a multinational group. It found that this derogated from normal practice under both Belgian company tax rules and the arm’s length principle.
EC competition policy commissioner Margrethe Vestager said: ‘Belgium has given a select number of multinationals substantial tax advantages that break EU state aid rules. It distorts competition on the merits by putting smaller competitors who are not multinational on an unequal footing. There are many legal ways for EU countries to subsidise investment [but] if a country gives certain multinationals illegal tax benefits that allow them to avoid paying taxes on the majority of their actual profits, it seriously harms fair competition in the EU, ultimately at the expense of EU citizens.’
In a statement, Belgium’s minister of finance, Johan Van Overtveldt, responded: ‘We now await the outcome of further negotiations with Europe regarding possible reimbursements. If Europe should decide that a reimbursement needs to be made, the consequences for the companies concerned would be considerable and … particularly complex. The course of these negotiations will determine our stance in this matter. At this point, we do not exclude any option. This also applies to the possibility of an appeal against the decision.’
