Belgium loses $825 million tax dispute at EU high court

LUXEMBOURG (CN) — Belgian tax breaks for more than 50 large corporations violate European Union law, the bloc’s top court ruled Thursday. 

A tax scheme known as "excess profit rulings” lets companies like oil giant BP and chemical manufacturer BASF drop their tax burdens by up to 90%, but the European Court of Justice found the agreements constituted illegal state aid, overturning a lower court ruling. 

The EU’s executive body, the European Commission, launched an investigation into the tax scheme in 2013, ultimately demanding that Belgian authorities claw back 700 million euros ($825 million) worth of tax relief. Belgium claims its rules are compliant with the 38-nation Organization for Economic Cooperation and Development and make doing business in the country easier for multinationals. 

United States-based instrument maker Magnetrol, Belgian beverage giant AB-InBev and Swedish industrial manufacturer Atlas Copco were among those who received tax breaks. They contested the commission’s decision and prevailed at the EU's lower court, the European General Court, in 2019. 

On Thursday, however, the Luxembourg-based Court of Justice overturned their win, finding that the General Court "made several errors of law."

The five-judge panel concluded that the commission was correct in classifying the tax breaks as a state aid scheme. National and local governments of the 27-member political and economic union are prohibited from supporting private companies on the grounds that it creates market distortions. 

"It is apparent from the case-law…that the Commission could not be accused of having exceeded its powers when it examined the measures constituting the scheme at issue and when it ascertained whether those measures constituted state aid,” the ruling states.

Critically, the court upheld the European Commission’s approach of going after the beneficiaries of the scheme as a whole, reversing the lower court's finding that the EU would need to investigate each company that benefited from the tax deal individually. In response to that decision, the commission opened 39 individual investigations in 2019.

In a statement Thursday, the commission said that it “will carefully study today’s judgment and assess its implications.” 

EU Competition Commissioner Margrethe Vestager has had mixed results with her ongoing crackdown on sweetheart tax deals. Her worst defeat before the court came last year, when the General Court rejected the commission’s demand that Apple pay back Ireland $13 billion in back taxes.

The General Court also nixed a $33 million penalty against Starbucks and a $30 million fine against Amazon. However, Vestager has prevailed against Fiat and got the go-ahead to investigate Nike earlier this year. 

Follow Molly Quell on Twitter

Follow @mollyquell

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit