The application of the 30% EBITDA interest limitation continues to give rise to significant uncertainty in Belgian acquisition structures. This uncertainty has now been elevated to EU level, as the court of first instance of Walloon Brabant has decided to refer a prejudicial question to the Court of Justice of the European Union.
Under the 30% EBITDA interest limitation rule, a taxpayer may deduct its exceeding borrowing costs (EBC) only up to 30% of its fiscal EBITDA or, alternatively, up to a EUR 3 million de minimis threshold (to be determined at Belgian group level). EBC are defined as the positive difference between the interest (and equivalent) expenses and the interest (and equivalent) income of the entity. Expenses and income arising from Belgian intragroup transactions are excluded from the calculation of the EBC.
This determination of EBC is particularly annoying for acquisition structures where a Finco1 obtains external funding and subsequently on-lends the proceeds to Belgian companies (e.g. to finance the acquisition and to refinance existing debt) with a mark-up. Because the interest income received from its Belgian group entities is excluded, the Finco is deemed to incur a fictitious EBC. This position may result in a tax cashout in case its 30% EBITDA threshold (or its portion of the EUR 3 million de minimis amount) is exceeded.
Belgian tax law explicitly permits the transfer of interest deduction capacity between Belgian group entities, even in excess of the transferring entity’s own capacity. Therefore, the Belgian group entities can transfer interest deduction capacity to the Finco, neutralizing Finco’s unintended EBC.
However, the tax authorities reject transfers of interest deduction capacity to the extent that they exceed the transferring entity’s own capacity. This position is based on an answer of the Minister of Finance to a parliamentary question and is included in an administrative circular letter and reflected in form 275CDI, which must be filed when transferring interest deduction capacity.
On 9 February 2025, the court of first instance of West-Flanders (Bruges) issued a favourable judgment confirming that the transfer of interest deduction capacity may exceed the transferring entity’s own capacity. The court confirmed that the law is clear and consistent with parliamentary works.
However, in a judgement of 20 April 2026, the court of first instance of Walloon Brabant interpreted the law in a fundamentally different way deciding that a Belgian group entity which itself has no available interest deduction capacity cannot transfer such capacity to other group companies. This interpretation aligns with the restrictive position traditionally adopted by the Belgian tax authorities.
The situation hence remains uncertain for the taxpayer.
On a positive note, the Walloon Brabant court did decide to refer a prejudicial question to the Court of Justice of the European Union. The core question is whether Belgium has correctly implemented the EU Directive (imposing the 30% EBITDA interest limitation rule) in internal law. According to the Belgian 30% EBITDA rule, negative fiscal EBITDA amounts of Belgian group entities must be redistributed at Belgian group level, whereas this is not the case for exceeding borrowing costs. In the case at hand, overall the companies did not have any exceeding borrow costs at Belgian group level.
Until the Court of Justice of the European Union provides guidance, it remains essential for companies involved in acquisition structures with a Finco to carefully assess their position when applying the 30% EBITDA rule.
Thanks goes to Christophe Rapoye, Lotte Jacobs and Maxine Floren for their contribution.
