Luxembourg, 22/06/2006 (Agence Europe) - In a ruling on a case lodged by the Kingdom of Belgium and Forum 187 ASBL against the European Commission, the European Court of Justice partially annulled the European Commission's decision of 17 February 2003 requiring Belgium to withdraw its advantageous tax regime for multinational companies' coordination centres or to amend it. In a press release, the Court of Justice explains that the contested decision did not law down appropriate transitional measures for some coordination centres and therefore violated the general principle of equal treatment. Forum 187 is a non-profit organisation representing coordination centres in Belgium.
In its decision, the European Commission required Belgium to scrap the tax system in force at the time or to amend it in such a way as to make it compatible with the common market. With regard to centres approved before 31 December 2000, the Commission decided the scheme could be maintained until the expiry of the individual appraisal applying on the date of notification of the decision, and until 31 December 2010 at the latest. If the authorisation was renewed prior to that date, the benefits of the regime could no longer be granted, even temporarily.
The Court of Justice rejected the claims of Belgium and Forum 187 for the full annulment of the contested decision insofar as it classified the disputed measures as state aid incompatible with the common market. But the Court agreed to partial annulment of the contested decision on the grounds of equal treatment because the decision failed to lay down appropriate transitional measures. The Court of Justice held that 'the coordination centres with an application for renewal of their authorisation pending on the date on which the decision was notified or with an authorisation which expired at the same time as or shortly after the decision was notified were entitled to have a legitimate expectation that a reasonable transitional period would be granted in order for them to adjust to the consequences of the decision and, secondly, that the coordination centres concerned did not have the time required to adjust to the change in the regime.'
The Court also held that the Commission's decision led to a difference in treatment of the coordination centres. 'Depending on the date on which the last renewal of an authorisation took place in 2001 and 2002, or whether the authorisation terminated at the same as or shortly after the notification of the decision, the time when the benefit of the regime is to expire will differ as, in the former case, it will occur on 31 December 2010, whereas in the latter, no transitional period is laid down.' The Court held that the Commission thereby infringed the general principle of equal treatment.
In 1982, Belgium introduced a special advantageous tax regime for coordination centres. To benefit from the regime, a centre first had to receive individual authorisation. In order to obtain that authorisation, the centre must from part of a multinational company and satisfy a number of conditions regarding its capital, reserves and annual turnover. Only certain preparatory, auxiliary and centralisation activities are authorised and undertakings in the financial sector are excluded. At the end of the first two years of their activity, centres must have at least the equivalent of 10 full-time employees in Belgium. In 1984 and 1987, the tax regime for the coordination centres was examined by the Commission, finding in essence that the regime did not contain a state aid element. However, in 1997, as part of an overall review of harmful tax competition, the Council adopted a code of conduct for business taxation calling for 'reflection on harmful tax competition'. In 2000, a Council report found that the Belgian provisions concerning the coordination centres were harmful tax measures which should be withdrawn by 31 December 2005. On 21 January 2003, the ECOFIN Council decided that the effects of certain harmful tax regimes could be extended. As regards the Belgian tax regime for coordination centres, it held that those centres which were subject to the regime on 31 December 2000 could continue to benefit from it until 31 December 2010. But on 17 February 2003, the Commission adopted the contested decision so Belgium and Forum 187 asked the Court of Justice to annul the Commission's decision. Along with the decision on Belgium, the European Commission adopted a decision on special tax regimes in the Netherlands and Ireland (see EUROPE 8403).
In 2002, while the European Commission was preparing to issue the 17 February 2003 decision, Forum 187 took the Commission to the European Court of First Instance. The case was sent to the European Court of Justice when Belgium joined forced with Forum 187. At the time, Forum 187 said it represented more than 230 multinationals which together had invested hundreds of millions of euros to set up coordination centres after the Commission had accepted the system on two occasions, in 1984 and in 1985. On 26 June 2003, the President of the Court of Justice, who was then Gil Rodriguez Iglesias, replied favourably to a request from Belgium and Forum 187 to be allowed to provisionally maintain the special tax scheme for the coordination centres while awaiting the Court's decision (see EUROPE 8496).