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EU Court Rejects Belgium's State Aid Appeal

by Ulrika Lomas, Tax-News.com, Brussels

29 July 2016


Belgium has lost its initial appeal against a ruling by the European Commission that it must claw back hundreds of millions of euros in state aid from companies which benefited from the country's "excess profits" tax scheme.

Belgium's attempt to delay or suspend the ongoing proceedings was dismissed in an interim order delivered by EU General Court President Marc Jaeger on July 19.

The Belgian Government had attempted to argue that its application for "interim relief" was justified because the case has caused huge legal uncertainty for companies in Belgium, which the Government fears may lead to reduced levels of investment in the country.

Belgium also contends that, as a small country, its tax authorities would be overwhelmed by the task of collecting all the necessary data from the companies in question, and recalculating and revising the tax that each company would have had to pay in the absence of the excess profit tax ruling system. It went on to argue that its administrative capacity would be further strained by the requirement to establish whether income reported in Belgium under the excess profit scheme has been or will be taxed elsewhere.

However, rejecting the motion, the court concluded that Belgium has failed to establish that it would be likely to suffer "serious and irreparable harm" if the requested suspension of the contested decision is not granted.

"Consequently, the condition relating to urgency is not satisfied," the court said.

Belgium is appealing against the decision by the European Commission, announced on January 11, 2016, that "selective tax advantages" granted by Belgium under its "excess profit" tax scheme are illegal under EU state aid rules.

Announcing its decision, the Commission said: "The Belgian 'excess profit' tax scheme, applicable since 2005, allowed certain multinational group companies to pay substantially less tax in Belgium on the basis of tax rulings. The scheme reduced the corporate tax base of the companies by between 50 percent and 90 percent to discount for so-called 'excess profits' that allegedly result from being part of a multinational group."

According to the EC, the scheme derogated from normal practice under Belgian company tax rules and the arm's length principle, and therefore broke state aid rules.

The Commission said that the scheme has benefited at least 35 multinationals, mainly from the EU, who must now return unpaid taxes, said to be EUR700m (USD636m), to Belgium.

Belgium's appeal against the main conclusion of the Commission's investigation, that the excess profits scheme deviates from the arm's length standard set forth in OECD transfer pricing guidance, is ongoing.

TAGS: court | tax | investment | European Commission | Belgium | interest | law | multinationals | transfer pricing | Europe

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