EU Court: ‘Belgium’s system of provisions on excess profits was state aid’

European Commissioner Margrethe Vestager He gets an important hit at home. The European Court of Justice ruled that the Dane was right to start fighting the Belgian provisions on excess profits six years ago, a convenient system in which multinational corporations in our country did not have to pay taxes on the “international” part of their profits. “This is an important legal victory for the commission,” said Stephan van der Giot, a court spokesperson.

According to the court, provisions on excess earnings already constitute state aid. However, this is not the end of it. European judges do not rule on the question of whether this is an permissible form of state aid. They also referred the question of whether it was right to recover the aid, to the EU Court of First Instance. He should examine these two questions carefully first.

In 2016, the European Commission ruled that the excess profits ruling regime was illegal and discriminatory against companies operating in Belgium only. European Competition Commissioner Margrethe Vestager has asked the Belgian tax authorities to recover 900 million euros in unclaimed taxes from 39 companies involved.

The Belgian government did so – the money is still withheld in an account – but also appealed this ruling. In 2019, the European Court of First Instance proved that our country was right.

According to the General Court, the Commission had not sufficiently demonstrated that the system of judgments regarding excess profits automatically amounted to preferential treatment and all files should have been individually evaluated. The commission appealed the ruling, but also opened 39 individual investigations into companies that received rulings about increased profits between 2004 and 2015.

These companies include AB InBev, BASF, BP, British American Tobacco, Henkel, Kinepolis, LMS, Omega Pharma, Ontex and Soudal. These investigations are still ongoing and should reveal whether these companies have been given an unfair competitive advantage, which would be a violation of European state aid rules.

In December 2020 Attorney General Julian Cocot In her view, the commission was right from the start and that the excess profits provisions constituted an aid scheme. She asked the European judges to overturn the ruling of the General Court and refer the case to the General Court. As is often the case, judges follow the attorney general’s opinion.

It will likely take another one to two years for a ruling from the lower court. The question is what the court ruling means in the meantime for the Commission’s other tax battles, for example the fights against Amazon and Apple. Van der Youth highlights the broader impact. “The Belgian case is very specific,” he warns. “You can’t draw very broad conclusions from it.”