On January 11, 2016 the European Commission announced its final decision on the state aid investigations into the Belgian so-called “excess profit” tax rulings system. The decision confirms the Commission’s preliminary view that the tax system in question constitutes state aid, incompatible with the internal market. As a result, Belgium has to recover the aid from the beneficiaries. It is now open to Belgium or the companies concerned to appeal the decisions before the Court of Justice of the European Union (CJEU).


In February 2015, the Commission opened an in-depth investigation into alleged state aid granted by Belgium to resident entities that are part of a multinational group, by way of tax rulings allowing unilateral downwards adjustments of their tax base.

Today’s decision follows similar investigations into transfer pricing rulings granted by the Netherlands and Luxembourg to Starbucks and Fiat, respectively. Also in line with these investigations, the Commission is currently reviewing tax regimes applied by Amazon, Apple and McDonald’s on their compatibility with EU state aid rules.

The launch, by the Commission of multiple investigations into the Member States’ tax rulings (primarily APAs) is part of the EU initiatives in the areas of tax transparency and tackling harmful tax competition between Member States and tax avoidance.

Under EU law, the Commission is obliged to review state aid granted by EU Member States. If it finds that the aid is not compatible with EU law, it is further compelled to require the Member States concerned to abolish or alter such aid within a prescribed time period, as well as force the latter to recover the aid from the taxpayers that have benefited. Broadly speaking, aid is incompatible with EU law if it distorts competition by, for example, favoring certain undertakings and thus affecting trade between Member States. However, certain aid is specifically considered compatible with EU law, such as certain regional aid granted to promote economic development.

The Decision

In its earlier decision to open a formal investigation and in today’s press release on the final decision, the Commission first observes that the “excess profit” tax rulings constitute a scheme. This is an important comment as this implies that all rulings granted under this regime are affected in case the decision is upheld before the CJEU.

The Commission then broadly defines the Belgian “excess profit” tax rulings as allowing multinational companies to reduce their tax base for alleged "excess profit" on the basis of the comparison between the actual recorded profit of a multinational and the hypothetical average profit a stand-alone company in a comparable situation would have made.

The Commission then argues that the exemption provided for under this “excess profit” ruling system does not apply to all undertakings subject to Belgium corporate income tax equally and that Belgium does not apply the arm’s length principle properly. As a consequence, the measure is considered as a selective advantage for which there is no justification.

On this basis, the Commission estimates that at least 35 multinationals have benefitted from this aid and that the amount to be recovered could reach € 700 million.

Next Steps

This decision forms part of the standard state aid investigation procedure. The non-confidential parts of the decision are expected to be published in the next few months. It is now open to Belgium or the companies in question to appeal the decisions before the CJEU.

Commentary by Meijburg & Co

This decision has to be seen in the light of the comprehensive state aid investigation process the Commission has intensified in December 2014 and is another indication that they are continuing to challenge the transfer pricing tax practices of certain EU Member States.

At this point in time it is difficult to draw conclusions since the text of the decision is not yet public. It should be noted that the decision can be appealed by either Belgium or the companies in question and only becomes final if not appealed or confirmed by the CJEU in the case of an appeal.

Meijburg & Co

January 2016

Click here to download the memorandum in pdf format