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Thursday, 16 September 2021

International Tax update: Excess profit rulings: Victory for the European Commission?

On 16 September 2021, the Court of Justice of the European Union dealt for the first time with the Belgian excess profit rulings. The Court ruled (in contrast to the General Court of the European Union) that the excess profit ruling system can indeed qualify as an aid scheme. This puts an end to the procedural-technical discussion. The court referred the case back to the General Court, which has to assess whether or not the excess profit ruling scheme constituted illegal state aid. 

A ruling is a (prior) decision from an independent section of the tax administration (the ‘ruling commission’) confirming how the tax rules will apply to a specific future situation. Excess profit rulings were specific rulings on the basis of which companies could exempt a part of their profit from tax by means of a downward profit adjustment in the context of transactions between a Belgian company and its foreign group entities. The reasoning behind this was that these companies should not be taxed on the part of their profit they could realize through economies of scale and synergies resulting from being part of an international group. The ‘excess’ part was considered not truly attributable to the Belgian company and therefore out of Belgium’s tax reach. As from 2005, the Belgian ruling commission issued excess profit rulings to 39 companies.

On 11 January 2016, the European Commission argued that Belgium, by means of these excess profit rulings, granted illegal state aid and ordered Belgium to recover EUR 764 million in total, plus interest from the companies involved. Belgium and a number of these companies subsequently issued an appeal for annulment against the decision from the European Commission before the General Court.

On 14 February 2019, the General Court ruled that the appeal was well-founded based on a formal (procedural-technical) rationale. The European Commission had wrongly qualified the excess profit ruling system as an aid scheme, the General Court argued. After all, there are various conditions that must be met for a government measure to qualify as an aid scheme. Including that there must be a scheme on the basis of which individual aid is granted to undertakings. According to the Court, such a scheme did not exist, so that the European Commission could not deal with all the excess profit rulings in a single State aid investigation. Instead, it should have examined each ruling separately and assessed them on an individual basis.  The European Commission reacted to the Court's judgment by lodging an appeal with the Court of Justice on the one hand, and by initiating individual State aid investigations into all individual excess profit rulings on the other hand.

On 3 December 2020, Advocate General KOKOTT opined that the excess profit ruling system did indeed constitute a(n) (aid) scheme. According to the Advocate General, an established practice that has developed in such a way as to give the impression that a certain category of cases is systematically and almost automatically treated in the same way can also constitute a qualifying aid scheme. She therefore advised the Court of Justice to set aside the General Court’s judgment.

On 16 September 2021, the Court of Justice confirmed Advocate General Kokott’s point of view and ruled in favor of the European Commission’s approach. The Court clarified that the concept of a "scheme" does include an established administrative practice of the authorities of a Member State when that practice reveals a "systematic approach". In that regard, the Court considers that the sample of rulings examined by the Commission (22 out of a total of 66) may be representative of the “systematic approach” adopted by the Belgian tax authorities. The Court of Justice also concluded that the General Court had misinterpreted other conditions for the existence of an "aid scheme". It therefore sets aside the judgment of the General Court and refers the case back to that same General Court, which must now assess whether the aid scheme constituted illegal state aid or not.

Rik Smet - Associate (

Thomas De Meyer - Associate (

Tiberghien’s international tax team will continue to monitor these and other tax developments relevant for Belgium / Luxembourg based multinational enterprises. Our editorial board consists of:

Koen Morbée (International and EU corporate tax,;

Michiel Boeren (International and EU corporate tax,;

Katrien Bollen (HR tax and global mobility,;

Ben Plessers (Transfer Pricing and Valuations,;

Gert Vranckx (VAT, customs, excises and other indirect taxes,;

Rik Smet (International and EU corporate tax,

In case you have further questions on this publication or want to discuss a tax query, please do not hesitate to contact the author(s) or one of the members of the editorial board.

This newsflash is for information purposes only and cannot be relied upon as legal advice.

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