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Constitutional Court Nullifies Fairness Tax

In a judgment handed down on March 1, 2018, the Constitutional Court of Belgium nullified the Fairness Tax. AmCham Belgium welcomes this judgment, which is in line with the Chamber’s long-standing recommendation to abolish this tax.

The Fairness Tax came into effect in January 2014 and was applicable to companies that are not SMEs, that pay more in dividends than their reported corporate tax base and that used the Notional Interest Deduction (NID) or tax losses carried forward to reduce their corporate tax base. Companies paying dividends that met these criteria were obliged to pay an additional tax equal to 5.15% of a very technically defined special taxable base. AmCham Belgium has raised objections to the Fairness Tax since its introduction.

The Court of Justice of the European Union (CJEU) already ruled, in May 2017, that this tax was not fully compliant with EU law. On March 1, the Belgian Constitutional Court ruled that essential features of the Fairness Tax violate Belgium’s constitutional fiscal principles of legality and non-discrimination, and, for these reasons, nullified the Fairness Tax in its entirety. The Court, however, (regrettably) decided in essence not to annul the tax for the period 2014-2018, leaving uncertainty as to whether companies that have been hurt by the tax for those years will be able to obtain reimbursement.

We recommend the Government continues its positive line of reform, building on the 2017 Summer Agreement – which already reduced the nominal corporate tax rate – by further simplifying the corporate tax system. The Fairness Tax became a symbol of a very complex and inefficient tax measure that damaged Belgium’s reputation for international business. Doing away with the Fairness Tax also for the past years would improve Belgium’s standing in the international business community. A simple, stable and competitive corporate tax system is needed for Belgium to confirm its growing attractiveness for business, taking into account the recent and ongoing tax reforms not only in neighboring countries, but also in the US.

AmCham Belgium looks forward to constructively working together with the Government to continue the far-reaching tax reforms, striving for our common goal of creating a more prosperous and competitive Belgium.

AmCham Belgium thanks the members of its Legal & Taxation Committee for their ongoing efforts to communicate our position and advocate for business-friendly tax reforms.