EU Commission To Investigate 39 Belgium “Excess Profit” Tax Rulings For Potential State Aid Violations

; posted on
September 17th, 2019

The European Commission announced that it has opened 39 in-depth investigations to assess whether Belgian “excess profit” tax rulings granted to multinationals between 2005 and 2014 provided benefits that are contrary to EU State Aid rules.

Background

Belgian company tax rules require companies, as a starting point, to be taxed based on profit actually recorded from activities in Belgium. However, the Belgian "excess profit" tax rulings, relying on the Belgian income tax code, allowed multinational entities in Belgium to reduce their corporate tax liability by so-called "excess profits" that allegedly result from the advantage of being part of a multinational group. These advantages included e.g. synergies, economies of scale, reputation, client and supplier networks, or access to new markets. In practice, the rulings usually resulted in more than 50% and in some cases up to 90% of those companies' accounting profit being exempt from taxation.

The excess profit rule allegedly constitute state aid

In response to such discounting excess profit, the European Commission concerned that the rulings endorsed unilateral downward adjustments of the beneficiaries' tax base, although the legal conditions were not fulfilled.

Moreover, the Commission has concerns that the Belgian “excess profit” tax system granted substantial tax reductions only to certain multinational companies that would not be available to companies in a comparable situation. As such, the Belgian practice of issuing “excess profit” rulings in favour of certain companies may have discriminated against certain other Belgian companies, which did not, or could not, receive such a ruling.

Companies subject to investigation

Referring to the commission statement, the excess profit tax ruling most likely involved the headquartered group. Quoted from the statement, the companies would be investigated by the commission include the following:

Luciad NV, BASF Antwerpen NV, EVAL Europe NV, BP Aromatics Limited NV, The Heating Company BVBA, British American Tobacco Coordination Center VOF, Evonik Oxeno Antwerpen NV and “NewCo”, Nomacorc SA, Delta Light NV, Henkel Electronic Materials (Belgium) NV, Puratos NV, Omega Pharma International NV, LMS International NV, Noble International Europe BVBA, Trane BVBA, VF Europe BVBA, St. Jude Medical Coordination Center BVBA, Soudal NV, Ontex BVBA, Atlas Copco Airpower NV, Belgacom International Carrier Services NV, Dow Corning Europe NV/SA, Capsugel Belgium NV, Kinepolis Group NV, Pfizer Animal Health SA / Zoetis Belgium SA, Anheuser-Busch Inbev NV / Ampar BVBA, Flir Systems Trading Belgium BVBA, Wabco Europe BVBA, Celio International NV/SA, Magnetrol International NV, Ansell Healthcare Europe NV, Esko-Graphics BVBA, Victaulic Europe BVBA, Astra Sweets NV, Mayekawa   Europe NV, Tekelec International SPRL, Bridgestone Europe NV, Chep Equipment Pooling NV, and Knauf Insulation SPRL.

Source: European Commission

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