In a decision of 11 January 2016, the European Commission has concluded that the selective tax advantages granted by Belgium under its ‘excess profit’ tax scheme are illegal under European State aid rules. The tax scheme has benefitted at least 35 multinational companies who must now return unpaid taxes to Belgium. The European Commission estimates the total amount to be recovered to be around EUR 700 million (see our previous news item).
On 4 May 2016, the decision was published on the website of the European Commission. It provides valuable insights on the European Commission’s reasoning, especially as regards the arm’s length principle for the determination of transfer prices, the reliance on the principle of legitimate expectations and the methodology for the recovery of the aid. In particular, it is underlined that the tax that would have been due in the absence of the excess profit exemption scheme must be calculated on the basis of the general scheme applicable in Belgium at the time of the granting of the aid and in respect of the actual factual and legal situation of the beneficiary, not in respect of hypothetical alternative situations based on different operational and legal circumstances that the beneficiary could have chosen in the absence of the excess profit exemption.
The next step will be the publication of the decision in the Official Journal. From that date, the beneficiaries of the excess profit rulings or other parties who are directly and individually concerned by the decision can file an appeal before the General Court of the European Union.