Fairness tax – Reference for a preliminary ruling to ECJ

Philippe Vanclooster 30 January 2015


The Belgian Constitutional Court (‘BCC’) has referred to the European Court of Justice (‘ECJ’) for a preliminary ruling in respect of the fairness tax.

The fairness tax was introduced by the Act of 30 July 2013 and is applicable as of assessment year 2014 (financial years ending 31 December 2013 up to and including 30 December 2014). It is a separate assessment in the Belgian corporate income tax at a rate of 5.15% on dividends distributed by large Belgian companies or Belgian branches of foreign companies. The fairness tax applies if notional interest deduction and/or tax losses carried forward are offset against the taxable basis for the respective taxable period.

In January 2014, a complaint was launched against the fairness tax with the BCC, arguing that the tax would infringe Belgian constitutional law, the Treaty on the Functioning of the European Union and the European Parent-Subsidiary Directive.

Within the framework of the respective procedures, the BCC has asked the ECJ to rule whether or not the fairness tax violates European law, taking into account the following:

  • A foreign company with a Belgian permanent establishment could be subject to the fairness tax when distributing a dividend, whereas a foreign company with a Belgian subsidiary will not be subject to the fairness tax when distributing a dividend.
  • A foreign company with a Belgian permanent establishment could be subject to the fairness tax even if the Belgian profits are fully reserved, but a Belgian subsidiary of which the reserves are fully reserved and hence which does not distribute any Belgian profits, could not be subject to the fairness tax.
  • Does the fairness tax constitute a withholding tax in breach of the European Parent-Subsidiary Directive, as a Belgian subsidiary could be subject to the fairness tax when distributing its profits to its parent company, whereas these profits would not be subject to the fairness tax if they would be retained within the Belgian subsidiary?
  • Does the European Parent-Subsidiary Directive prevent that dividends received by a Belgian company qualifying for the dividends received deduction would result in a higher fairness tax basis when being redistributed in a later year, whereas they would result in a lower fairness tax basis when being redistributed in the same year?