On 4 December 2013, the European Commission announced that it had opened an in-depth investigation with regard to the compatibility of Belgium’s system of support for innovative companies with State aid rules under the Treaty on the Functioning of the EU (TFEU).
In 2006, the European Commission approved a scheme that exempted certain innovative companies (“Young Innovative Companies”, i.e. companies that are small, have existed for less than 10 years and spent at least 15% of their total costs on R&D) from paying payroll tax on scientific personnel under the condition that Belgium incorporated into its national legislation the definitions of the types of research eligible for tax breaks under European rules.
For more details on the European Commission’s original initiative, see European Union-2, News 27 October 2005 and European Union-1, News 29 November 2006.
In 2011, the Commission found that Belgium only introduced these definitions 7 years later, in 2013. Providing tax breaks to innovative companies without these definitions does not allow aid to be targeted on the R&D objective that justifies its granting. Therefore, the aid appears to have conferred an undue advantage on the beneficiary companies, which is contrary to the State aid rules on R&D.
Moreover, according to the European Commission, Belgium failed to notify the Commission when they renewed the scheme after its expiry in July 2011, and increased the level of tax relief.
Third parties have now the opportunity to submit their observations on the investigation.
Read the press release: Commission opens in-depth investigation into tax exemptions given to certain Belgian companies