ECJ Ruling May Unblock EU Savings Tax Directive

by Ulrika Lomas, for LawAndTax-News.com, Brussels

08 July 2003

Belgium is expected to withdraw its threat to block the progress of the European Union's savings tax directive following an European Court of Justice (ECJ) ruling in its favour last week.

Late last month, following Belgium's ultimatum with regard to its coordination centre regime and the savings tax plan, the European Commission announced that tax breaks offered to multinational groups with service units established in Belgium constitute illegal state aid, and must therefore be discontinued, explaining that:

"The use of a flat-rate method to determine taxable profits is not in itself challenged by the Commission because under Belgium's law it provides for an appropriate method of taxation of certain activities of foreign groups in Belgium.

"However, the Commission considers that the Belgian-FSC scheme reduces the normal tax burden that FSCs or the multinational groups to which they belong would face.'

The ECJ has suspended the EC's decision pending an official ruling from the court. However, given that this is unlikely to be forthcoming for at least two years, it appears that Belgium's request for current contracts - and the tax breaks which go with them - to remain valid until 2005, has been indirectly granted.

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