State aid: Commission extends formal investigation procedure regarding Belgian coordination centres
European Commission - IP/07/370 21/03/2007
Brussels, 21st March 2007
The European Commission has decided to extend the procedure opened in 2002 under the EC Treaty’s rules on state aid in respect of the tax scheme for coordination centres (see IP/02/325). It is thereby allowing Belgium and interested parties to submit their observations following the European Court of Justice’s judgment of 22 June 2006. This judgment partly annuls the transitional measures laid down by the Commission in its decision of 17 February 2003 finding the coordination centres scheme to be incompatible with the Treaty (see IP/03/242). In the light of the observations received, the Commission will decide what transitional measures it should have applied from 17 February 2003.
In its judgment of 22 June 2006 the Court confirmed that the tax scheme for coordination centres was incompatible with the common market but partly annulled the transitional measures laid down by the Commission for the phasing-out of the scheme.
This annulment leaves the procedure initiated by the Commission on 27 February 2002 partially open. The procedure must therefore be closed by a new decision laying down appropriate transitional measures for the centres concerned. The Commission is therefore extending the procedure before adopting a new decision in order to give interested parties the opportunity to submit their observations.
For the Commission, the judgment's scope is confined to a number of centres which were not given a sufficient transitional period to adapt to the change in the tax scheme.
The Court annulled the decision of 17 February 2003 “in so far as it does not lay down transitional measures for those coordination centres with an application for renewal of their authorisation pending on the date on which the contested decision was notified or with an authorisation which expired at the same time as or shortly after the notification of the decision.” It held that the lack of transitional measures infringed the general principles of EU law relating to the protection of the legitimate expectations and equal treatment of the scheme’s beneficiaries. It found that “the expression ‘shortly after’ should be understood as referring to a date so close to that on which the contested decision was notified that the coordination centres concerned did not have the time required to adjust to the change in the scheme in question.”
The factors to be taken into account by the Commission will include the following: requests for extensions sent by Belgium to the Commission, the Council of the European Union and the Court following the adoption of the decision of 17 February 2003, the beneficiary undertakings' estimates of the period necessary to adapt to the end of the scheme, the duration of provisional renewals granted by Belgium to centres whose approval expired between 17 February 2003 and 31 December 2005 and the entry into force on 1 Janaury 2006 of the "notional interest deduction" scheme, which seems to offer centres a genuine alternative.
A coordination centre is an undertaking belonging to a multinational group providing services (financing, cashflow management, research and development, etc.) to other undertakings in the group. Since 1983, under a special scheme approved by the Commission, these undertakings enjoyed in Belgium an appreciably lower assessment basis for corporation tax and a number of exemptions (droit d’apport (capital duty), précompte immobilier (property tax), and précompte mobilier (withholding tax)). In its decision of 17 February 2003 the Commission declared these tax breaks to be incompatible with EC Treaty state aid rules. It authorised those coordination centres whose ten-year period of approval was under way to continue to enjoy the benefits of the scheme until the end of that ten-year period until 31 December 2010 at the latest, but it prohibited, with immediate effect, the renewal of approvals when they expired.