CJEU should reverse Belgian excess profits tax decision, Advocate General says

The Advocate General of the Court of Justice of the Europe Union (CJEU), in a December 3 opinion, advised the CJEU to overturn a General Court decision that assessed the legality of Belgium’s excess profits tax scheme.

Advocate General Juliane Kokott said she disagreed with the General Court’s determination that the Belgium excess profits tax scheme was not an “aid scheme.” Kokott said the CJEU should refer the case back to the General Court to again assess whether the Belgian scheme is unlawful State aid or not.

The dispute concerns a special tax exemption that Belgium provided to members of multinational groups beginning in 2002. Belgium would reduce the tax base of Belgian group members to account for excess profits, like synergies and economies of scale, that are the result of being part of a multinational group. To obtain this tax benefit, the multinational needed to obtain a private tax ruling from the Belgian tax authority.

The European Commission, in a decision issued January 11, 2016, concluded that the Belgian scheme was unlawful State aid and that at least 55 multinationals benefited from the aid.

Following legal challenge, the EU General Court, on February 14, 2019, annulled the Commission’s decision. The General Court concluded that the Commission had failed to prove that the Belgian tax scheme was an aid scheme.

Obtaining the Belgian tax benefit depended on the tax authorities granting a tax ruling and the Commission failed to prove that the tax authorities used a systematic approach in all the rulings, the General Court said. In reaching its conclusions, the General Court noted that the Commission only reviewed a sample of the rulings.

Advocate General Kokott has now expressed the contrary view that the sample was sufficient for the purposes of proving a consistent administrative practice.

Advocate General Kokott proposes that the case be referred back to the General Court. The General Court must still assess whether the advance tax rulings concerning the downward adjustment of profits constitute State aid and whether the recovery of the alleged aid infringes the principles of legality and of the protection of legitimate expectations, the Advocate General said.