On 26 March, Advocate General (AG) Kokott released a number of opinions on the EU State Aid challenge to Belgium’s excess profits regime. That regime exempts certain "excess" profits of Belgian entities which form part of multinational corporate groups. Those entities can obtain an advance tax ruling from the Belgian tax administration, in particular if they centralise activities, create employment or make investments in Belgium. Although an AG opinion is not binding on the Court of Justice of the EU (CJEU), the Court often follows the AG’s recommendations.
In 2016, the European Commission found that that the excess profits exemption system in Belgium constituted an unlawful EU State Aid scheme and it ordered the recovery of the State Aid from 55 beneficiary companies. After an appeal to the CJEU, the matter was sent back to the EU General Court and in September 2023, the General Court found that the exemptions granted by Belgium to companies forming part of multinational groups did constitute an unlawful Aid scheme.
Subsequently, appeals to the CJEU from the September 2023 decision have been brought in a number of cases and AG Kokott’s opinions arise in those cases. The opinions address the principles to be followed when determining the reference framework for State Aid.
The AG noted that Member States have a margin of discretion regarding Aid schemes in the form of general tax laws and that the standard of review of the Commission and the EU Courts is correspondingly less stringent. However, the limits of that discretion are exceeded where the tax law is configured in a manifestly inconsistent manner or where the national authorities manifestly apply the tax law at odds with its wording, and hence inconsistently. The standard of review to be applied is limited to a mere “plausibility check” – that is whether the configuration and application cannot be plausibly explained to a third party, such as the Commission or the EU Courts.
On that basis, the AG agreed with the General Court that it was not the relevant tax provision, but rather its manifestly unlawful application, which was a derogation from the reference framework, namely the Belgian law on corporate income tax.
The AG also noted that the CJEU has consistently held that recovery of unlawful aid is the logical consequence of the finding that it is unlawful. The mere fact that a certain tax treatment was promised in an advance tax ruling by national authorities could not, by itself, justify legitimate expectations from the perspective of EU law. In any event, legitimate expectations would not merit protection if the error in the application of the law was readily apparent to the taxpayer (as the General Court had found in this case).
