Law implementing recovery procedure with regard to the Belgian excess profit provision adopted


Belgium has adopted on 22 December 2016 the law covering the implementation of the European Commission (‘EC’) decision of 11 January 2016 (‘Decision’) with regard to the Belgian excess profit provision based on Article 185 §2 of Belgian Income Tax Code 1992 (‘BITC’).

The law, which has been drafted in cooperation and with the approval of the EC, will enter into force the day of its publication in the Belgian Official Gazette. On the basis of this law, the Belgian tax authorities are entitled to issue a tax assessment to the companies which obtained and applied an excess profit ruling. These tax assessments are still expected before 31 December 2016.


The Decision pertains to the Belgian tax provision laid down in Article 185 § 2 BITC which codified the “arm’s length” principle in 2004. This provision considers (cross-border) intra group relations in order to assess corporate tax on an arm’s length basis. Based on this Article: (i) the taxable basis of a Belgian company can be increased to the extent it is lower than the at arm’s length profit, (ii) the taxable basis can be reduced to the extent it exceeds the arm’s length profit.

The EC concluded in the Decision that Belgium used the unilateral downward adjustment enshrined in Article 185 §2, b) BITC to decrease the tax base of multinational companies and considered the provision to be the basis for granting unlawful State aid. Therefore, the EC ordered recovery of the unlawful State aid granted. The Decision of the EC is currently challenged by the Belgian government and multiple beneficiaries at the General Court of the European Union. As such action does not impact nor suspend the recovery procedure in itself, the approved law determines the modalities of the recovery from the beneficiaries.

The methodology for recovery

1. Tax assessment

The recovery will take the form of corporate tax assessments under the Belgian corporate tax procedures (the law provides some deviations from standard procedure).

2. Amount of the aid

The amount of the aid will be determined for each financial year covered by an excess profit ruling on the basis of a recalculation of the corporate tax assessment of the beneficiary, making abstraction of the excess profit provision. The amount of the aid equals the recalculated corporate tax due less the corporate tax already paid in the past.

3. Interest

The recovered amount of aid will be increased with a compound interest which reflects the time value of the aid obtained. The interest will be calculated according to Chapter V of the EC Regulation No 794/2004 of 21 April 2004.

The cumulated interests are an integral part of the amount to be recovered, and are due from the date on which the aid was granted up to the date of re-payment. The recovery interest, in line with the provisions of Belgian domestic law, constitutes a tax deductible cost for the beneficiary.

4. Corrections to the recovery amount

Because of the methodology (recalculation of the tax assessment for each year), some items of the tax return are automatically considered in view of the recovery (e.g. unused tax losses or tax credits). Some other items are allowed upon specific request from the beneficiary such as the application of R&D tax deductions or credits, or Patent Income Deduction. The burden of proof to apply these items lies with the beneficiary. To the extent the Belgian excess profit was effectively taxed abroad, a correction is required to determine the correct amount of the aid to be recovered.

Next steps

Based on this recovery law the Belgian tax authorities will issue a corporate tax assessment as soon as the law is published in the Official Gazette. The recovery should be implemented irrespective of the fact that several actions for annulment of the Decision are pending at the General Court of European Union. If the General Court or, in case of further appeal the European Court of Justice, were to decide that the EPR does not constitute unlawful fiscal state aid, the amounts recovered will be refunded.