The European Commission decides to refer BELGIUM to the Court of Justice of the European Union for failing to correctly transpose the Anti-Tax Avoidance Directive
Today, the European Commission decided to refer Belgium to the Court of Justice of the European Union for failing to correctly transpose the Anti-Tax Avoidance Directive (Directive (EU) 2016/1164).
The Anti-Tax Avoidance Directive allows a Member State where a parent company of a multinational is located to tax profits made by a ‘controlled foreign company' in another Member State. This is allowed when the tax paid by the controlled foreign company is less than half of what would be paid in the Member State of the parent company (the CFC rule). The company should be granted a tax credit for all taxes that it has paid abroad.
However, contrary to the Directive, Belgian law does not allow a taxpayer to deduct from its tax liability the tax already paid by a controlled foreign company in the state of tax residence.
On 2 July 2020, the European Commission sent a letter of formal notice to the Belgian authorities, followed by a reasoned opinion on 1 December 2021, requesting them to amend their legislation within two months. As Belgium's reply to the Commission's reasoned opinion was not satisfactory, the Commission has decided to refer Belgium to the Court of Justice of the European Union.
Background
The Anti-Tax Avoidance Directive (Directive (EU) 2016/1164), as amended, contains five legally binding anti-abuse measures, which all Member States should apply against common forms of aggressive tax planning.
It aims to create a minimum level of protection against corporate tax avoidance throughout the EU, while ensuring a fairer and more stable environment for businesses.
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