State aid in Belgium: Commission opens tax investigation

state aid in belgium
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The European Commission has opened a series of investigations into potential breaches of the EU’s rules governing state aid in Belgium.

The Commission will investigate tax rulings on ‘excess profit’ issued between 2005 and 2014 for 39 Belgian firms operating as part of larger multinational groups. ‘Excess profit’ rulings enable Belgian branches of multinational companies to waive a certain amount of corporate tax by taking into account the ‘excess profits’ they allegedly receive as a direct result of being part of a multinational group, including those deriving from economies of scale, extended networks of clients and suppliers; and access to new and international markets. In 2016, the Commission ruled that the rulings, which typically resulted in the exemption from tax of between 50% and 90% of company profits, constituted the unacceptable application of state aid in Belgium; but this decision was annulled in February 2019.

The General Court, which applied the annulment, did not express an opinion on whether state aid laws had been breached; instead, the court ruled that the Commission had not adequately established the existence of an active scheme being operated by the Belgian government. The Commission must now therefore open individual investigations into each of the cases in question, in order to determine whether ‘excess profit’ rulings have offered an untoward advantage to the companies to which they were applied; as well as whether the rulings constituted a misapplication of Belgium’s tax policy.

Commissioner in charge of competition policy Margrethe Vestager said: “All companies must pay their fair share of tax. We are concerned that the Belgian ‘excess profit’ tax system granted substantial tax reductions only to certain multinational companies that would not be available to companies in a comparable situation. Following the General Court’s guidance, we have decided to open separate State aid investigations to assess the tax rulings. We also await further clarity from the European Court of Justice on the existence of an aid scheme.”

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