The rulings practically resulted in over 50 percent and in some cases up to 90 percent of those companies’ accounting profit being tax exempt.
The European Commission, on September 16, announced that it has opened separate in-depth investigations into “excess profit” Belgian tax rulings granted to multinational enterprises (MNEs), in potential breach of EU State aid rules.
The investigations concern individual “excess profit” tax rulings issued by Belgium between 2005 and 2014 to 39 Belgian MNEs, most of which are headquartered in Europe.
According to the EU Commission, the rulings rely on the Belgian income tax code to allow MNEs in Belgium to reduce their corporate tax liability by so-called “excess profits” that allegedly result from the advantage of being part of an MNE group. The rulings practically resulted in over 50 percent and in some cases up to 90 percent of those companies’ accounting profit being tax exempt.
The Commission’s preliminary view is that the tax rulings under investigation selectively misapplied the Belgian income tax code and, as a result, likely gave a selective advantage to the concerned MNEs allowing them to pay substantially less tax.
EU Competition Commissioner Margrethe Vestager said: “We are concerned that the Belgian ‘excess profit’ tax system granted substantial tax reductions only to certain MNEs that would not be available to companies in a comparable situation.”
Since June 2013, the Commission has been investigating individual tax rulings or rulings granted under tax schemes of member states under EU State aid rules.
As on date, the Commission has two ongoing in-depth investigations concerning tax rulings issued by the Netherlands in favour of Inter IKEA and Nike and an investigation concerning tax rulings issued by Luxembourg in favour of Huhtamaki.
The author is Alex Hunter, Editor, TP News. He oversees and updates the publication and also regularly writes news stories about transfer pricing and international tax law. Alex is reachable at editor@transferpricingnews.com