EC Amends Transitional Measures For Belgian Coordination Centres

by Ulrika Lomas, Tax-News.com, Brussels

15 November 2007

The European Commission announced on Tuesday that it has amended the transitional measures that it had applied to Belgian coordination centres in 2003 to enable them to adapt to changes in the tax system.

This decision follows a judgment of the European Court of Justice partially overturning the Commission Decision of 17 February 2003, and was issued following consultation with the Belgian authorities and interested third parties. The decision allows those centres whose authorisation expired between 17 February 2003 and 31 December 2005 to benefit from the system until 31 December 2005.

The Commission further considers that the Belgian law of 27 December 2006, under which new authorisation renewal decisions would prolong the coordination centre system beyond 31 December 2005, is incompatible with the common market.

EU Competition Commissioner Neelie Kroes explained that:

"The Commission has granted Belgium the period of transition that it desired in 2003 and from which the companies concerned have in fact benefited. It would not, however, have been reasonable to authorise all centres to benefit until the end of 2010 from a system that ceased to be compatible in 2003".

On 22 June 2006, the Court of Justice of the European Communities confirmed that the coordination centre system constituted a state aid scheme incompatible with the common market. The Court annulled the Commission Decision of 17 February 2003 only in so far as it did not provide transitional measures for "those coordination centres whose request for re-authorisation was pending on the date the contested decision was notified or whose authorisation expired at the same time the aforementioned decision was notified or shortly thereafter".

The decision of 17 February 2003 authorised the centres to continue to take advantage of the system until the expiry of their current authorisation or 31 December 2010, whichever came first. In Belgium's view, it was entitled, based on the principle of equality, to prolong the existence of all the coordination centres until 31 December 2010, and it adopted the law of 27 December 2006 to this end.

Moreover, the deadline of 2010 was justified, in Belgium's view, by the alleged need to make the new transition period run from the date of the new decision rather than from 17 February 2003.

The decision adopted this week rejects these arguments. The Commission considers that the Court explicitly limited the scope of the annulment of the decision to cover the situation of certain centres whose authorisation expired shortly after the decision of 17 February 2003 and that it would be advisable to limit the definition of the new transition period to these centres that have not had a sufficiently lengthy transition period.

Moreover, the ruling declaring the system incompatible with the common market was valid as from 17 February 2003, and the transition period actually began on 17 February 2003 for the centres concerned, owing to the suspension of the ban on renewal of authorisations ordered by the Court on 26 June 2003.

On the basis of the elements in its possession, the Commission concludes that the transition period that it should have provided for in its decision of 17 February 2003 to enable the coordination centres to adapt to the change of arrangement should have run from 17 February 2003 to 31 December 2005. Logically, the companies to which this new transition period applies are those whose authorisation expired no later than 31 December 2005.

For those centres whose current authorisation expired after 2005, the transition period remains valid – until the expiry of their authorisation or the end of 2010, whichever comes first. Pursuant to the law of 27 December 2006, the effects of the system will not be able to be retained by new extensions of authorisations.

Recommended