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Belgium: EC investigations of “excess profit” tax rulings granted multinational companies

Belgium: EC investigations of “excess profit”

The European Commission today announced it has opened “separate” in-depth investigations of whether Belgium’s “excess profit” tax rulings granted to 39 multinational companies were in breach of the EU state aid rules.


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Today’s action follows the EU General Court's annulment of the EC’s earlier finding that the same tax rulings formed part of a Belgian aid “scheme” that was illegal under EU state aid rules. Read KPMG’s Euro Tax Flash

In today’s release, the EC stated that the General Court:

  • Did not take a position as to whether or not the “excess profit” tax exemptions gave rise to illegal state aid
  • Found that the EC had failed to establish the existence of a “scheme” or plan—meaning that the compatibility of the tax rulings with EU state aid rules must be assessed individually

Hence, the EC today announced it has opened separate in-depth investigations of the individual tax rulings granted to the 39 companies. 

“Excess profits” tax rulings

The EC’s in-depth investigations concerned individual "excess profit" tax rulings issued by Belgium between 2005 and 2014 for 39 Belgian companies belonging to multinational groups. Most of these multinational groups are headquartered in Europe.

Belgian corporate tax rules require companies, as a starting point, to be taxed based on profit actually recorded from activities in Belgium. However, the Belgian "excess profit" tax rulings—relying on provisions of the Belgian income tax code (Article 185 §2, b of the Code des Impôts sur les Revenus/Wetboek Inkomstenbelastingen)—allowed multinational entities in Belgium to reduce their corporate tax liability by "excess profits" that allegedly result from the advantage of being part of a multinational group. These advantages included, for instance, synergies, economies of scale, reputation, client and supplier networks, or access to new markets. In practice, the EC found that the rulings typically resulted in more than 50% and in some cases up to 90% of those companies' accounting profit being exempt from taxation.

The EC's preliminary view was that by discounting “excess profit” from the beneficiaries' tax base, the tax rulings under investigation selectively misapplied the Belgian income tax code. In particular, the EC’s concerns have been that the rulings endorsed unilateral downward adjustments of the beneficiaries' tax base, although the legal conditions were not fulfilled.

The EC also has concerns that the Belgian practice of issuing “excess profit” rulings in favor of certain companies may have discriminated against certain other Belgian companies, which did not, or could not, receive such a ruling. As a result, the tax rulings may have given a selective advantage to the 39 multinational companies, allowing them to pay substantially less tax.


Read a September 2019 report prepared by KPMG’s EU Tax Centre

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