On Thursday 14 February, the Court of First Instance of the European Union annulled the European Commission's decision from January 2016 considering as illegal State aid the Belgian tax regime linked to the surplus profits enjoyed by 55 multinational companies between 2005 and 2015 (joint cases T-131/16 and T-263/16 - see EUROPE 11465).
In 2016, Belgium and Magnetrol International challenged the Commission's decision before the Court of First Instance. They also criticised the latter's interference in Belgium's exclusive powers in the field of direct taxation.
From 2005, Belgian entities of multinationals were able to benefit from an advance ruling by the Belgian tax authorities when these entities claimed that a new situation existed (relocation of the central contractor to Belgium, job creation or new investments). At that time, profits considered to be 'surplus' were exempt from corporation tax because they exceeded the profits that comparable autonomous entities would have made in similar circumstances.
In its judgement, the Court of First Instance ruled in favour of Belgium, even though it considered that the Commission was competent to examine the scheme in the light of European State aid rules.
On the merits, the European judge is of the opinion that the Commission erroneously qualified the system of exemption from excess profits as an aid scheme. In his view, the provisions identified as the basis of the alleged aid scheme did not provide for all the essential elements referred to in Council Regulation (2015/1589) laying down detailed rules for the application of Article 108 of the TFEU.
According to the Regulation, an aid scheme is any provision on the basis of which, without the need for further implementing measures, aid may be granted individually to undertakings defined in a general and abstract manner in that provision, and any provision on the basis of which aid not linked to a specific project may be granted to one or more undertakings for an indeterminate period and/or for an indefinite amount.
The Court finds that the Belgian authorities had to adopt additional implementing measures to grant an exemption. They had discretion over all the essential elements of the scheme in order to influence the characteristics, amount and conditions under which the exemption was granted. It cannot be concluded that they followed a systematic course of action with respect to the advance rulings concerned. Finally, the beneficiaries of the scheme were not identified in a general and abstract way. (Original version in French by Mathieu Bion)