European Commission announces investigation into Belgian excess profit ruling system


On 3 February 2015, the European Commission released a press release announcing an in-depth investigation into a Belgian tax provision that allows group companies to reduce their corporate tax basis with a profit part that results from the advantage of belonging to a multinational group, on the basis of what is referred to as an “excess profit” tax ruling. The press release explains the concerns of the European Commission with this provision in the light of the EU State Aid rules and announces a further investigation to conclude if its doubts are justified.


This investigation relates to the Belgian tax provision laid down in article 185, §2 of the Belgian Income Tax Code. This article was introduced in Belgian tax law in 2004 and has formally introduced the arm’s length principle in the Belgian Income Tax Code. This provision considers (cross-border) intra group relations in order to assess corporate income tax on an arm’s length basis. On the basis of this on this article:

  • the taxable basis of a Belgian company can be increased to the extent it is lower than an arm’s length profit;
  • the taxable basis can be reduced to the extent the taxable basis exceeds an arm’s length profit (e.g. as a result of being part of a multinational group).

Concerns of the European Commission

At this stage, the Commission has doubts if the tax provision complies with EU State Aid rules, which prohibit the granting to certain companies of selective advantages that distort competition in the Single Market, pointing out that:

  • there is a concern that this provision is only for the benefit of a limited number of multinational companies (not available to stand-alone Belgian-based companies);
  • depending on the case, this provision may result in the reduction of a significant part of the income of a Belgian company;
  • the provision applies subject to the requirement that an upfront ruling is obtained in Belgium. The Commission notes that these rulings have often been granted to companies that have relocated a substantial part of their activities to Belgium or have made significant investments in Belgium.

Based on the foregoing, the European Commission has decided to further investigate this Belgian tax provision with a view to assessing whether its concerns are justified.

Transfer pricing and EU-law

This investigation follows the European Commission’s investigation of the the tax ruling practice of Member States in view of the EU State Aid rules. In December 2014, the Commission issued an information inquiry to all Member States. The opening of this investigation gives interested parties an opportunity to submit comments.

For more detailed information, please do not hesitate to contact the author or:

Patrick Boone
+32 2 710 4366

Pieter Deré
+32 9 268 8321