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EU’s Court of Justice to decide fate of Belgium’s ‘fairness tax’

EU’s Court of Justice to decide fate of Belgium’s ‘fairness tax’

BRUSSELS: The Act of 30 July 2013 introduced a so-called “fairness tax”, aimed at taxing distributed profits (dividends) which are not effectively subject to Belgian corporate tax due to application of the notional interest deduction and/or carried-forward tax losses.

The Constitutional Court requested a preliminary ruling from the Court of Justice of the European Union (CJEU) on the question of whether the fairness tax is compatible with EU law. This article describes the measures you can take pending the CJEU’s decision.

The fairness tax is intended to tax distributed profits (dividends) which are not effectively subject to corporate tax due to application of the notional interest deduction and/or carried-forward tax losses. The fairness tax applies as from assessment year 2014 (i.e., financial years ending between 31 December 2013 and 30 December 2014, inclusive) to both Belgian companies and Belgian permanent establishments of foreign companies which are not considered SMEs within the meaning of Article 15 of the Company Code. However, SMEs may still fall within the scope of the fairness tax if they form part of a corporate group since, in that case, the applicable thresholds (number of employees, annual turnover, balance sheet total) are assessed on a consolidated basis.