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European Commission - Press release

State aid: Commission opens in-depth investigation into the Belgian excess profit ruling system

Brussels, 03 February 2015

The Commission has opened an in-depth investigation into a Belgian tax provision, which allows group companies to substantially reduce their corporation tax liability in Belgium on the basis of so-called "excess profit" tax rulings. In essence, the rulings allow multinational entities in Belgium to reduce their corporate tax liability by "excess profits" that allegedly result from the advantage of being part of a multinational group. At this stage, the Commission has doubts if the tax provision complies with EU state aid rules, which prohibit the granting to certain companies of selective advantages that distort competition in the Single Market. The opening of an in-depth investigation gives interested third parties an opportunity to submit comments. It does not prejudge the outcome of the investigation.

Commissioner Margrethe Vestager in charge of competition policy said: "The Belgian "excess profit" tax system appears to grant substantial tax reductions only to certain multinational companies that would not be available to stand-alone companies. If our concerns are confirmed, this generalised scheme would be a serious distortion of competition unduly benefitting a selected number of multinationals. As part of our efforts to ensure that all companies pay their fair share of tax, we have to investigate this further."

According to the Belgian tax provision under investigation (Article 185§2, b) Code des Impôts sur les Revenus / Wetboek Inkomstenbelastingen), a company's tax can be reduced by so-called "excess profits". These are profits registered in the accounts of the Belgian entity that allegedly result from the advantage of being part of a multinational group. In order for the deductions to apply, a company needs prior confirmation by the Belgian tax administration through a tax ruling. This scheme appears to only benefit multinational groups, whilst Belgian companies only active in Belgium cannot claim similar benefits.

According to the Belgian authorities, this tax provision only implements the general OECD "arm's length" principle. However, at this stage the Commission has doubts that this interpretation of the OECD principle is valid.

The Commission has concerns that the "excess profit" alleged under the tax rulings, i.e. the deductions that a company can claim for e.g. intra-group synergies or economies of scale, significantly overestimate the actual benefits of being in a multinational group. The deductions granted through the excess profit ruling system usually amount to more than 50% of the profits covered by the tax ruling and can sometimes reach 90%.

Moreover, the Commission's assessment so far concludes that the Belgian "excess profit" tax system cannot be justified by the objective to prevent double taxation. This is because the deductions in Belgium do not correspond to a claim from another country to tax the same profits.

Having examined past administrative practice, the Commission notes that these tax rulings are often granted to companies that have relocated a substantial part of their activities to Belgium or that have made significant investments in Belgium.

The Commission will now investigate further to conclude if its doubts are justified.


The Commission is looking at the compliance with EU state aid rules of certain tax practices in Member States in the context of aggressive tax planning by certain multinationals with a view to ensure a level playing field. A number of Member States seem to allow multinational companies to take advantage of their tax systems and thereby reduce their tax burden.

Since June 2013, the Commission has been investigating under state aid rules the tax ruling practice of Member States. In December 2014, the Commission extended this information inquiry to all Member States.

On 11 June 2014, the Commission opened under state aid rules formal investigations in three cases, respectively: Apple in Ireland, Starbucks in the Netherlands and Fiat Finance& Trade in Luxembourg. On 7 October 2014, the Commission opened another investigation regarding Amazon in Luxembourg. The probes examine whether Member States provide certain companies a selective advantage in the context of issuing a tax ruling.

The non-confidential versions of the decisions will be made available under the case numbers SA.37667, in the State Aid Register on the competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.


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