EC in-depth investigation under State aid rules into the Belgian excess profits ruling system

Under Article 185, § 2, B of the Belgian Code on revenue taxes, an international group may ask for its taxes to be reduced by so-called excess profits, which are registered in the account of the Belgian entity as a result of the benefits of being part of an international group. The beneficiary of such a measure requests a prior confirmation by the Belgian tax administration through a tax ruling. The Belgian excess profits ruling system only benefits multinational groups as it aims to prevent double taxation, according to the Belgian authorities.

On 3 February 2015, the European Commission announced the opening of an in-depth investigation into this Belgian tax provision as it doubts that it complies with EU State aid rules. The Commission is not convinced by the Belgian authorities’ argumentation regarding the objective of preventing double taxation. According to the Commission, the excess profits alleged under the tax ruling that were taken into consideration significantly overestimated the actual benefits of being part of a multinational group. The deduction granted through this system varies from 50% to 90% in some cases. The beneficiaries of these deductions are multinational groups that have located an important part of their activities in Belgium or have made important investments in this country. The Commission will therefore further investigate this measure in order to determine if it grants a selective advantage to certain multinational companies to the detriment of stand-alone companies.

The Belgian authorities may now respond to the Commission’s position. The Commission’s decision to open the in-depth investigation will be published in the coming months in the Official Journal of the EU. Third parties, including the beneficiaries of the system, will have the opportunity to submit their observations to the Commission. The Belgian authorities will receive those observations and may comment on them. Once the file is complete, the Commission will adopt a final decision on the qualification of the system under State aid rules.

This investigation follows a number of similar inquiries regarding Apple in Ireland, Starbucks in the Netherlands and Fiat Finance & Trade or Amazon in Luxembourg.