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Belgian tax scheme illegal under state-aid rules

The European Commission ruled that Belgium violated European stat-aid legislation by granting at least 35 multinationals tax advantages under its “excess profit” tax scheme.

Belgian company tax rules require companies to be taxed on the basis of profit actually recorded from activities in Belgium. However, Belgium allowed multinational companies to reduce their tax base for alleged “excess profit” on the basis of a binding tax ruling. Under such tax rulings, the actual recorded profit of a multinational is compared with the hypothetical average profit a stand-alone company in a comparable situation would have made. The alleged difference in profit is deemed to be “excess profit” by the Belgian tax authorities, and the multinational’s tax base is reduced proportionately. The scheme reduced the corporate tax base of the companies by between 50% and 90%.

Belgium claim that such schemes are necessary to prevent double taxation did not convince the Commission which now  requires from Belgium to stop applying the “excess profit” scheme. Furthermore Belgium now has to recover the full unpaid tax from the at least 35 multinational companies that have benefited from the illegal scheme. The multinational companies benefiting from the scheme are mainly European companies, who also avoided the majority of the taxes under the scheme. The Commission estimates the total amount to be recovered from the companies to be around €700 million.

Commissioner Margrethe Vestager, in charge of competition policy, stated: “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 and many good reasons to invest in the EU. However, 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 October 2015, the Commission has decided that Luxembourg and the Netherlands have granted selective tax advantages to Fiat and Starbucks, respectively. The Commission also has three ongoing in-depth investigations into concerns that tax rulings may give rise to state aid issues, concerning Apple in Ireland, Amazon in Luxembourg and McDonald’s in Luxembourg.


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