The European
Commission has enlarged its state aid investigation into private tax ruling
practices to cover all 28 European Union States. On 8 June 2015, the European
Commission announced its next steps in its EU-wide State aid review of Member
States’ tax ruling practices.
Definition (OECD’s Consolidated Application Note, 2004)
“Any advice, information or undertaking provided by a tax authority to a
specific taxpayer or group of taxpayers concerning their tax situation and on
which they are entitled to rely”
Typical
conditions:
-
facts accurately presented;
-
taxpayer abides by the terms of the ruling.
Policy rationale
-
higher certainty of applicable tax law;
-
higher compliance by taxpayers;
-
lower litigation.
State aid
Tax rulings are
generally not as such a problem under EU state aid rules. However, if a tax
ruling results in a Member State providing selective advantages to specific
companies or groups of companies, this distorts competition in the Single
Market in breach of EU state aid rules.
Under the State
aid rules contained in the EU treaties, State aid is an advantage given by a
Member State to specific companies (or specific sectors of the economy), which
affects competition within the EU. This advantage is not restricted to
beneficial tax treatment: it can either be measures granting positive benefits
(such as direct subsidies) or measures which enable a business to mitigate
costs it would otherwise have incurred.
Belgium
The Commission opened the state aid investigation February 3, noting
that deductions granted through Belgium’s ruling system usually amount to more
than 50 percent and sometimes up to 90 percent of the company’s profits.
The rulings allow multinational entities in Belgium to reduce their
corporate tax liability by “excess profits” that allegedly result from the advantage
of being part of a multinational group. The Belgian tax authorities argue that
each company of a multinational group should be taxed as if it was independent,
and that any excess profits should not be taxed in Belgium and are thus exempt
from corporate taxation.
The European Commission has announced that its current view is that
Belgium’s excess profits tax ruling system provides for a selective advantage
tantamount to State aid, and has requested stakeholder comments on this
determination by July 5.
