BELGIUM’S EXCESS PROFIT TAX SCHEME IS ILLEGAL UNDER THE EU STATE AID RULES

The “excess profit” tax scheme applicable in Belgium since 2005 reduced the corporate tax base of certain multinational companies by between 50% and 90%, whilst stand-alone companies only active in Belgium could not achieve similar benefits.

The tax scheme, marketed by the Belgian tax authority under the logo “Only in Belgium”, represented a very serious distortion of competition within the EU’s Single Market affecting a wide variety of economic sectors.

According to a recently published decision of the European Commission, Belgium is required to stop applying the “excess profit” scheme in the future. Furthermore, in order to remove the unfair advantage and to restore fair competition, Belgium has to recover the unpaid taxes from at least 35 multinational companies that have benefited from the illegal scheme. It will be the task of the Belgian tax authorities to identify which companies have in fact benefited from the illegal tax scheme and to determine the precise amounts of tax to be recovered from each company. The Commission estimates that it amounts to around €700 million in total.