Belgium: “Fairness tax” partially contrary to EU law | KPMG | GLOBAL
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Belgium: “Fairness tax” partially contrary to EU law (CJEU judgment)

Belgium: “Fairness tax” partially contrary to EU law

The Court of Justice of the European Union (CJEU) today issued a judgment holding that the Belgian “fairness tax” is partially contrary to EU law.


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The fairness tax (introduced in July 2013) is a separate tax of 5.15% imposed on the distribution of profits, if the distributing company has benefitted in the year in relation to which the distribution occurs from the use of notional interest deduction and/or tax losses carried forward. The fairness tax is applicable both to domestic companies and to Belgian permanent establishments of foreign companies.

The CJEU judgment concludes that the fairness tax breaches article 4 of the Parent-Subsidiary Directive. Specifically, the CJEU found the fact that dividends received by a Belgian company from its subsidiary in another EU Member State are to be included in the taxable base of the fairness tax upon redistribution by the Belgian company in a later year violates article 4 of the Parent-Subsidiary Directive. 

Still, the CJEU left it to the Constitutional Court (the referring court) to decide whether the fairness tax constitutes an infringement of the freedom of establishment for a foreign company with a Belgian permanent establishment.

KPMG observation

Now that the CJEU has issued its judgment, it will be up to the Belgian Constitutional Court to render its final judgment (reflecting the CJEU’s conclusion but addressing also Belgian constitutional law issues). The ultimate impact of the ongoing litigation for those taxpayers that have been subject to the fairness tax will become fully clear only once also the Belgian Constitutional Court has rendered its judgment. Taxpayers may want to consider starting an administrative procedure on the basis of the CJEU judgment, specifically if there is less favorable treatment of a foreign company with a Belgian permanent establishment or a redistribution of received dividends in a later year.


Read a May 2017 report prepared by the KPMG member firm in Belgium

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