European Court Upholds Belgium’s Tax Breaks for Multinationals

European Court Upholds Belgium’s Tax Breaks for Multinationals

On Valentine’s Day, the European General Court (EGC) overturned a decision by the European Commission alleging that tax breaks offered to multinational companies operating in Belgium consisted of state aid.

As explained by Dr. Patricia Lampreave for MNE Tax, European authorities “wrongly concluded that the Belgian tax system relating to the excess profit of multinational companies constituted an aid scheme.”

This case specifically pertains to Belgium’s excess profit scheme, which benefited 35 different multinational companies in the EU that purportedly earned close to 700 million Euros in state aid.

Some of the companies that gained from this scheme include British Petroleum (BP), BASF, Wabco, Cellio, Atlas Copco, Anheuser-Busch InBev NV, Coca-Cola and Proximus, among others.

According to Lampreave, the European Commission “determined that Belgium’s excess profit tax scheme, applied since 2005, allowed Belgian tax resident companies that were part of a multinational group to pay substantially less tax in Belgium on the basis of tax rulings.”

In some cases, this scheme, which was sold under the moniker ‘Only in Belgium,’ managed to reduce companies’ corporate tax bases by up to 90 percent, offering a “discount for so-called “excess profits” that allegedly result from being part of a multinational group.”

The EGC decided that “the Commission erroneously determined that the Belgian excess profit system constituted an aid scheme; therefore, it´s mainly a procedural error of the Commission.”

The Luxembourg-based EU court specifically said, “The General Court annuls the Commission's decision concerning tax exemptions granted by Belgium by means of rulings. The Commission wrongly considered that the Belgian system relating to the excess profit of multinational companies constituted an aid scheme.”

However, it is important to keep in mind, writes Stephen Daly in his tax blog taxatlincolnox, that “the Court only had to decide whether the regime itself amounted to an aid scheme” and not “whether the way in which the law was administered by the tax authority was selective.”

What’s Next for Belgium’s Excess Profits Scheme?

What’s Next for Belgium’s Excess Profits Scheme?

The European Commission is expected to appeal this ruling with a final decision eventually being reached by the European Court of Justice.

As reported in The Brussels Times, Belgian finance minister Alexander De Croo said the 700 million Euros “reclaimed from companies is blocked for the time being, while a ruling from the Court of Justice was awaited.”

However, lawyers in Belgium do believe that the European Commission might move to challenge this excess profits scheme on a case-by-case basis.

Jacques Derenne, a partner with Sheppard Mullin, told Reuters, “The Commission can take a new decision qualifying each individual case.”

According to Rochelle Toplensky writing for the Financial Times, “This defeat limits the commission’s ability to pursue cases against umbrella tax schemes that are not clearly defined.”

“However such arguments have little impact on Brussels’ most high profile tax investigations, which have focused on tax rulings for individual companies,” she explains.

Ultimately, however, Johan Van Overtveldt, who served as finance minister back in 2016 when the case was first brought up, does not believe this scheme will be revived.

“That won't be necessary, because of the lowering of corporation tax that has been introduced in the meantime,” he commented to Belga news agency.

Do you have any special insight into this case in Belgium? What will the end result be?

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