The ECJ will – most likely in the course of 2016 – make a decision on the compatibility of the so-called ‘fairness tax’ with EU law.
The fairness tax was introduced in 2013. It is an additional tax that aims to submit to a 5,15 per cent levy any dividend distribution of profits that have not been effectively submitted to corporate income tax by reason of the application of the specific Belgian ‘notional interest deduction’ or the deduction of a loss carry-forward.
In our view, this fairness tax is contrary to the requirements of the Parent–Subsidiary Directive. Since the levy (i) is only due in case of a dividend distribution, (ii) is calculated on the basis of the amount of the distribution, and (iii) is a separate levy that cannot be affected, reduced etc by any of the regular corporate income tax rules so that it can be seen to constitute a levy that is to be supported by the shareholder, it appears to us that in application of the ECJ Athinaiki case (C-294/99) the fairness tax is a levy tantamount to a dividend levy that is not allowed if an EU-based parent company owns 10 per cent or more of the shares of the Belgian company.
If the ECJ decides the fairness tax breaches EU law, the Belgian state will need to repeal it and reimburse fairness tax paid so far by companies, plus 7 per cent interest. Fairness tax payers can proactively file administrative complaints but can also await the outcome of the ECJ decision. An ECJ decision is generally recognised as a ‘new fact’ enabling a tax payer to file a so-called automatic relief.