The European Commission opened an in-depth investigation regarding the compatibility of a Belgian tax provision with EU state aid rules, which prohibit the granting to specific companies of selective advantages that distort competition in the Single Market.
The provision under investigation concerns section 185§2, b) of the Belgian Income Tax Code (Wetboek Inkomstenbelastingen/Code des Impôts sur les Revenus) enabling group companies to reduce their Belgian corporate tax liability significantly by so-called "excess profits", which allegedly result from the advantage of being part of a large multinational group. However, in order for the deductions to apply, the prior confirmation from the Belgian tax administration is required in a tax ruling.
The European Commission has reasons to believe that the Belgian tax administration significantly over-estimates these "excess profits", which are allegedly the result of intra-group synergies or economies of scale. The European Commission highlights the tendency to grant favourable tax rulings to multinational companies that recently relocated a significant part of their activities to Belgium, or recently made large investments in Belgium.
Furthermore, the European Commission notes that the provision only appears to benefit multinational groups while companies only active in Belgium are not eligible for the deductions. Finally, the European Commission notes that the provision cannot be justified by the goal of avoiding double taxation as there are no corresponding claims from other countries to tax the same "excess profits".
On the basis of the foregoing, the European Commission suspects that this Belgian tax provision is contrary to the EU state aid rules and will investigate the matter to determine whether its concerns are justified. The investigation is part of the European Commission's ongoing efforts in a range of Member States to ensure that companies are paying taxes that are due.
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