The European Commission has concluded that selective tax advantages granted by Belgium under its “excess profit” tax scheme are illegal under EU state aid rules. The scheme has benefitted at least 35 multinationals mainly from the EU, who must now return unpaid taxes to Belgium. 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% and 90% to discount for so-called “excess profits” that allegedly result from being part of a multinational group. The Commission’s in-depth investigation opened in February 2015 showed that the scheme derogated from normal practice under Belgian company tax rules and the so-called “arm’s length principle”. This is illegal under EU state aid rules. Commissioner Margrethe Vestager, in charge of competition policy, stated: “Belgium has given a select number of multinationals substantial tax advantages that break EU state aid rules. It distorts competition on the merits by putting smaller competitors who are not multinational on an unequal footing. There are many legal ways for EU countries to subsidise investment and many good reasons to invest in the EU. However, if a country gives certain multinationals illegal tax benefits that allow them to avoid paying taxes on the majority of their actual profits, it seriously harms fair competition in the EU, ultimately at the expense of EU citizens”. The Commission decision requires Belgium to stop applying the “excess profit” scheme also in the future. Moreover, in order to remove the unfair advantage the beneficiaries of the scheme have enjoyed and to restore fair competition, Belgium now has to recover the full unpaid tax from the at least 35 multinational companies that have benefitted from the illegal scheme. A full press release is available in EN, FR, DE and NL.
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