In a recent judgment of 1 March 2018, the Belgian Constitutional Court annulled the Belgian fairness tax. The annulment is not retroactive except in certain situations, such as dividend distributions falling under the Parent-Subsidiary Directive (“PSD”).
Introduced in 2013, the Belgian fairness tax was a separate tax of 5.15% on distributed dividends not taxed because of the notional interest deduction and/or tax losses carried forward. However, only “big companies” were within the tax’s scope.
Following an annulment request, the Belgian Constitutional Court requested a preliminary ruling from the European Court of Justice (“ECJ”), which then decided, on 17 May 2017, that the fairness tax violated Article 4 of the PSD.
On 1 March 2018, the Constitutional Court ruled that the fairness tax violates Articles 10, 11 and 172 of the Belgian Constitution, which guarantee equality and non-discrimination. Hence, the Court annulled the fairness tax.
Nevertheless, the Court decided that the fairness tax should still apply when assessing years 2014–2018, meaning the annulment is not retroactive as is usually the case. However, it is retroactive where a Belgian company redistributes dividends, as the ECJ ruled this incompatible with the PSD.
The government anticipated the annulment when it abolished the fairness tax in its recent reform of the Belgian corporate tax regime.