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September 18, 2019

European Commission launches 39 State-aid investigations on Belgian “excess profit” tax rulings

Executive summary

On 16 September 2019, the European Commission (the Commission) announced that it will conduct 39 individual in-depth investigations in relation to tax rulings received by companies operating in Belgium allowing them to reduce their tax liability on “excess profits,” i.e., profits exceeding an arm’s-length profit level derived from being part of a multinational group. The Commission previously found that the rulings create an illegal State-aid scheme,1 also ordering that the aid granted be recovered from the beneficiaries.2 But the General Court subsequently rejected this decision,3 spurring the Commission to conduct further examination.

Detailed discussion


While companies are taxed on the profit recorded from activities in Belgium, the Belgian tax code allows a reduction of their tax base by the amount of the so-called “excess profits” that, based on a transfer pricing analysis, are demonstrated to exceed an arm’s-length profit level and arise from being part of a multinational group.

Thirty-nine companies received rulings from the Belgian tax authority for this reduction. The amount of the reduction was very fact-dependent for each individual case and was determined based on a transfer pricing analysis.

The Commission believes that, by issuing theses rulings and discounting excess profits from the tax base, Belgian authorities misapplied the tax code in favor of certain companies while disadvantaging those without such rulings. While rulings that confirm tax arrangements are permissible, rulings that grant an advantage to specific companies may distort competition within the European Union’s (EU’s) Single Market and run afoul of State-aid rules.

After an in-depth investigation of the overall excess profits tax exemption, the Commission determined in January 2016 that the tax rulings were an illegal aid scheme under EU State-aid rules and ordered Belgium to recoup the proceeds. In February 2019, the General Court annulled the Commission’s decision, holding that the Commission had failed to establish the existence of an aid scheme, but did not opine on whether the scheme was illegal and confirmed that it is within the Commission’s purview to determine. The Commission has appealed the decision, and its preliminary view is that, by discounting “excess profits” from the beneficiaries’ tax base, the tax rulings under investigation selectively misapplied the Belgian income tax code. In particular, the Commission has concerns that the rulings endorsed unilateral downward adjustments of the beneficiaries’ tax base, although the legal conditions were not fulfilled.

New investigations

As the General Court confirmed that the Commission may determine whether the excess profit tax exemptions violate State-aid rules but that it had not proven that the exemptions did so, the Commission is undertaking the new, separate investigations to more fully assess each of the 39 rulings individually.

Describing the development, Commissioner Margrethe Vestager, in charge of competition policy, said that: “We [the Commission] are concerned that the Belgian “excess profit” tax system granted substantial tax reductions only to certain multinational companies that would not be available to companies in a comparable situation. Following the General Court’s guidance, we have decided to open separate State aid investigations to assess the tax rulings. We also await further clarity from the European Court of Justice on the existence of an aid scheme.”


The decision of the Commission illustrates its readiness to continue its State-aid investigations. The opening of the in-depth investigations gives Belgium one month to respond to the EC’s opening decisions. The opening decision will be published in the Official Journal of the EU (likely in a few months), after which individual taxpayers will have one month to submit their comments.



2. See EU Commission, press release, IP/16/42.

3. Judgment of the General Court, 14 February 2019,;jsessionid=57177CDBB93A04857674E974E707792A?text=&docid=210761&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=13546940.

For additional information with respect to this Alert, please contact the following:

EY Belgium, Brussels
  • Steven Claes |
Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Munich
  • Klaus von Brocke |
Ernst & Young LLP (United Kingdom), London
  • Chris Sanger |
Ernst & Young LLP (United States), New York
  • Jean-Charles van Heurck |
Ernst & Young LLP (United States), Washington, DC
  • Rob Thomas | 



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