On 14 February 2019, the EU General Court annulled the European Commission’s State aid decision of 11 January 2016 on Belgian excess profit rulings on the formal ground that the Belgian rules did not constitute an aid scheme (as opposed to individual measures). The General Court did not address the pleas addressing the findings of selectivity and of an advantage. The Commission had ordered recovery of the alleged aid from dozens of multinationals simultaneously (see our earlier tax flash here) through deciding that the Belgian excess profit ruling measures formed an aid scheme.
State aid is defined as a measure granted by the State or through State resources, which distorts or threatens to distort competition and affects intra-EU trade by favouring certain undertakings or the production of certain goods. Measures meeting these criteria may constitute an aid scheme in particular in case they do not need further implementing measures and define beneficiaries in a general and abstract manner.
The General Court’s findings
The General Court first dismissed the plea that the Commission had encroached on Belgium’s tax sovereignty, including the competence to adopt measures to prevent double taxation, as the measure did not appear to pursue that objective. It thereby confirmed the right of the Commission to examine the compatibility of tax rulings under State aid rules.
The General Court then turned to assessing whether the Belgian rules and the related rulings effectively constituted a scheme and found that the criteria were not met:
- Implementing measures were needed and the tax authorities had a genuine margin of discretion in deciding whether it was appropriate to grant the downward adjustment to the Belgian company’s taxable profits.
- The beneficiaries could not be identified on the sole basis of the tax provision in the law without further implementing measures.
- The Commission’s analysis of a limited sample of rulings did not meet the requisite standard of proof to establish a systematic approach. Deficiencies in the contested decision could not be remedied by additional information provided during the proceedings.
The General Court’s judgment can be found here.
As a result of the judgment of the General Court, beneficiaries of the excess profit rulings no longer have to repay the alleged aid. Those who had already done so may claim back the amount paid to Belgium. The Commission may appeal the judgment to the Court of Justice, on points of law only, within two months and 10 days of its notification.
The General Court had earlier decided to stay all the proceedings relating to the excess profit rulings that were started by 29 multinationals affected by the European Commission’s decision, until a final decision was given in the case of the Belgium State (and Magnetrol International) versus the Commission. These proceedings will not resume before the above appeal period has run and might never resume if the General Court’s decision is final or confirmed.
Absence of impact on other cases
As the General Court does not address the selectivity and advantage criteria, no lesson may be drawn for the other pending cases concerning aid allegedly granted by the Netherlands to Starbucks, Ireland to Apple, and Luxembourg to Fiat, Amazon and ENGIE by means of various tax rulings. Apart from the cases pending before the General Court, formal investigations continue into the tax treatment of Inter Ikea and Nike in the Netherlands and into the UK CFC financing exemption rules (which the European Commission also examines as a scheme).