On 11 January 2016 the European Commission (EC) adopted its final decision regarding the Belgian excess profit ruling system and concluded that this system constitutes unlawful fiscal State Aid. Among the key parameters of this decision have been that a) this system is only available to a limited number of multinational companies and not available to stand-alone companies only active in Belgium, b) that the system may result in the exemption of a significant part of the income of Belgian companies, resulting in double non-taxation and c) that the system derogates from normal practice under Belgian company tax rules and the “arm’s length principle under EU state aid rules”.
The EC thereby largely confirms its preliminary conclusions as per its opening decision published on 5 June 2015. The Belgian government is now ordered to take all necessary actions to recover the State Aid granted, which based on the press release of the EC, is estimated at some EUR 700m. If the case is litigated before the European Courts (which appears likely), the Court of Justice of the European Union will ultimately decide on the fiscal State Aid nature of this measure.
This decision should be seen in the light of a number of recent investigations by the EC in respect of the use of tax rulings concerning the application of the transfer pricing rules and the arm’s length standard. The EC already issued negative final decisions regarding Fiat in Luxembourg and Starbucks in The Netherlands, while the EC’s final decisions into Apple in Ireland and Amazon in Luxembourg are expected in the coming months.
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For further information, please contact your PwC advisor or the contacts listed below:
Partner, Leader Corporate Tax Switzerland
+41 58 792 4343
Anna-Maria Widrig Giallouraki
Senior Manager, International Tax
+41 58 792 4287