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Belgium to challenge European tax ruling


The Belgian government plans to challenge an EU demand for it to reclaim tax breaks from multinationals of up to €835 million, MLex has reported.

Belgian finance minister Johan Van Overtveldt will hire lawyers to file an appeal at the EU's General Court in Luxembourg, a Belgian government official told the legal news site.

Last month the European Commission said that selective tax advantages granted by Belgium under an 'excess profit' tax scheme are illegal under EU state aid rules, and that the tax must be repaid.

The scheme, which has been running since 2005, allowed some multinational companies to reduce their corporate tax base by between 50% and 90% to allow for 'excess profits' that were considered to result from being part of a multinational group.

Under the tax rulings the actual recorded profit of a multinational was compared to the hypothetical profit of a standalone company in a similar position. The difference was then deemed to be 'excess profit' and the tax base reduced accordingly, the Commission said.

The Commission's investigation found that this does not follow normal practice under Belgian rules nor the EU state aid 'arm's-length principle', and is illegal under EU rules.

Van Overtveldt said in a statement at the time that the decision was expected. "That is why I took action on the issue from the start," he said.

"Following the first warning signs from the European Commission, we put the system on hold and did not issue any more Excess Profit Rulings from February 2015. We are also the first country to have started the spontaneous exchange of rulings to other countries. This transparency is important to me," Van Overtveldt said.

State aid expert Caroline Ramsay of Pinsent Masons, the law firm behind Out-Law.com said: "Litigation in the European courts can often be very drawn-out and a quick resolution to this appeal is therefore unlikely. This will add to the already high level of uncertainty currently circulating as a result of the European Commission’s attacks on other forms of international corporate taxation practices and transfer pricing."

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