www.pwc.com/eudtg
11 January 2016
Newsalert
EU Direct Tax Group
EU Commission final State Aid decision
regarding the Belgian excess profit
ruling system
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For more detailed information
about this Newsalert, please do not
hesitate to contact:
Pieter Deré
PwC State Aid Working Group
+32 (0)9 268 83 21
[email protected]
Sjoerd Douma
PwC State Aid Working Group
+31 (0)88 792 42 53
[email protected]
Isabel Verlinden
PwC Transfer Pricing Services
+32 (0)2 710 44 22
[email protected]
On 11 January 2016, the European Commission (EC)
announced, in a press release, the adoption of its final
decision in the formal State aid investigation into the
Belgian excess profit ruling system embodied in
article 185, section 2, b) of the Income Tax Code
(ITC). The EC largely confirms the preliminary
conclusions as expressed in the non-confidential
version of the opening decision which was published
on 5 June 2015. The EC has now formally concluded
that in its opinion the excess profit provision
constitutes unlawful fiscal State aid which must be
recovered. The press release refers to at least 35
beneficiaries and estimates the amount of the
recovery at EUR 700 mio. The press release
elaborates further the reason for this decision.
Background
The final decision pertains to the Belgian tax
provision laid down in article 185, section 2, b) BITC
which codified the “arm’s length” principle in 2004.
This provision considers (cross border) intra group
relations in order to assess corporate income tax on
an arm’s length basis. Based on this article: (i) the
taxable basis of a Belgian company can be increased
to the extent it is lower than the at arm’s length profit,
(ii) the taxable basis can be reduced to the extent it
exceeds the arm’s length profit.
According to the EC, the system derogates from
normal practice under Belgian company tax
rules and the “arm's length principle under EU
State aid rules”.
The non-confidential version of the decision will be
needed to provide further insights in the reasoning
developed by the EC and how the arm’s length
principle under EU State aid rules links in with the
Belgian and OECD principles.
Next steps
The EC orders the Belgian Government to take all the
necessary steps to recover the State aid granted. The
Belgian Government will now have to assess the
amounts to be recovered from the beneficiaries.
Litigation before the European Courts appears likely
and in that case the Court of Justice of the European
Union will ultimately have the final say on the merits
of the EC’s decision.
Transfer pricing and EU Law
This decision should be seen in the light of a number
of recent investigations by the EC in respect of the
use of tax rulings concerning the application of the
transfer pricing rules and the arm's length standard.
The EC already issued negative final decisions
The EC appears to be concerned that Belgium uses regarding Fiat in Luxembourg and Starbucks in The
the unilateral downward adjustment in article 185 §2, Netherlands.
b) BITC to decrease the tax base of multinational
companies.
The EC’s final decisions into Apple in Ireland and
Key aspects
The EC has focused on a number of attributes of the
Belgian excess profit ruling regime, which it
considered to be key for further analysis, and, now, in
its final decisions:

Or contact any of the other PwC
EUDTG State Aid Working
Group (SAWG) Members
Or your usual PwC contact


Amazon in Luxembourg, are expected in the coming
months.
The non-confidential version of the Belgian decision
will become available under case number SA 37667
in the EC’s State aid register on DG Competition’s
website once any confidentiality issues have been
The EC concludes that this system is only resolved.
available to a limited number of multinational
companies and in particular it is not available Finally, it can be noted that the press release of the
to stand-alone companies only active in EC also makes reference to both the C(C)CTB as well
as the anti-BEPS directive which is expected in the
Belgium.
coming weeks. This reference may suggest that the
The EC holds that the system may result in the
EC considers that these initiatives are in some way
exemption of a significant part of the income of
connected with the current State Aid investigations.
Belgian companies, resulting in double nontaxation.
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