The European Commission has concluded that selective tax advantages granted by Belgium under its “excess profit” tax scheme are illegal under EU state aid rules. The scheme has benefited at least 35 multinationals mainly from the EU, who must now return unpaid taxes of up to €700 million to Belgium according to the Commission.

The Belgian “excess profit” tax scheme, which is in place since 2005, allowed certain multinational group companies to pay substantially less tax in Belgium on the basis of tax rulings. The scheme reduced the corporate tax base of the companies by between 50% and 90% to discount for so-called “excess profits” that allegedly result from being part of a multinational group. The Commission’s investigation which opened in February 2015 has concluded that the scheme derogated from normal practice under Belgian company tax rules and the so-called “arm’s length principle”. This is illegal under EU state aid rules.

Since June 2013 the Commission has been investigating the tax ruling practices of Member States. It extended this information inquiry to all Member States in December 2014. The Commission in October 2015 decided that tax rulings for Fiat in Luxembourg and Starbucks in the Netherlands granted illegal selective tax advantages to the companies in breach of EU state aid rules. Both countries are appealing against the decision. The Commission also has ongoing state aid investigations into tax rulings concerning Apple in Ireland and Amazon and McDonalds in Luxembourg. Further details of the Commission’s investigation in the Belgian excess profit scheme are available in Commission’s press release.