Belgian excess-profit tax-break beneficiaries appeal EU ruling

31 January 2017 9:55am

1st August 2016. Mari Eccles

More companies have appealed the European Commission’s ruling that found against a Belgian corporate tax-break on “excess profits.” Drug-capsule manufacturer Capsugel and diaper maker Ontext are among the new complainants.

The regulator has ordered the Belgian government to recover 835 million euros ($932 million) from multinationals that benefited from the program, after ruling in January that the tax break on “excess profits” amounted to an illegal state subsidy. Under the Belgian program, companies that shifted profits from one subsidiary to another could get a tax discount on profits by showing that a proportion resulted from economies of scale within a group and the benefits of integration.

Capsugel, which is in line to repay 44.4 million euros, accused the commission in its appeal of committing a “manifest error of assessment” when it identified the program as in breach of EU state-aid rules.

Capsugel’s appeal to the EU’s lower-tier General Court was published in the Official Journal, alongside the joint appeal by bakery group Puratos, lighting manufacturer Delta Light and Ontex.

They say the commission exceeded its power and failed to provide reasons in its decision earlier this year.

Ontex must pay back 31 million euros while the Belgian government has been told to recover 10.2 million euros and 5.4 million euros from Puratos and Delta Light, respectively.

Magnetrol, a company that makes instruments that measure flow and levels, has also appealed the commission decision. Magnetrol faces a 2.1 million-euro bill for the tax-breaks it received.
At least nine other companies have already challenged the commission ruling.

The Belgian government is now weighing its options as it plans to update its corporate tax system and keep the multinationals from deserting the country. Last month, it proposed legislation that would allow companies hit by the commission’s ruling to take advantage of other programs during years they claimed the deductions under the excess-profit regime.

The case numbers are T-263/16 Magnetrol International v Commission, T-265/16 Puratos and others v Commission, T-266/16 Capsugel Belgium v Commission

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