Belgian Constitutional Court raises prejudicial question about the UTPR

The Belgian Constitutional Court decided to raise a prejudicial question to the Court of Justice of the EU about the validity of the Undertaxed Profits Rule (UTPR), as announced in its judgment of 17 July 2025. The appeal for the case was filed by the 'American Free Enterprise Chamber of Commerce' (non-profit organization under the law of the State of Wyoming (United States)) which was seeking the annulment of the UTPR provisions of the Belgian Law on minimum taxation (i.e., Art. 35-36 of the law of 19 December 2023).

The UTPR provisions of the Belgian law on minimum taxation are based on those of the EU Directive of 14 December 2022 (i.e., Art. 12 to 14 of Directive (EU) 2022/2523). This Directive aims to ensure a global minimum level of taxation for groups of multinational enterprises and large-scale domestic groups and incorporates the Pillar Two Global Anti-Base Erosion Rules (hereafter: GloBE rules). For national application, the Directive was transposed into domestic law of EU Member States, incl. Belgium.

The GloBE rules require in-scope groups to pay top-up tax if their effective tax rate in a jurisdiction in which they operate is below 15%. This top-up tax is collected under three subsequentially applicable mechanisms: (1) the Qualified Domestic Minimum Top-up Tax (QDMTT), (2) the Income Inclusion Rule (IIR) and (3) the Undertaxed Profits Rule (UTPR). Where the top-up tax on the MNE’s low-taxed income in a jurisdiction cannot be collected under the QDMTT and the IIR, the outstanding amount of the top-up tax is collected by all jurisdictions in which the MNE is present and which have implemented the UTPR. The outstanding amount is allocated among these jurisdictions by reference to a substance-based allocation key.

Under the Belgian law on minimum taxation, the UTPR top-up tax is collected from a Belgian constituent entity when the group’s UPE is (i) an excluded entity; (ii) resident in a third country without a qualifying IIR; or (iii) resident in a low tax jurisdiction. However, while the QDMTT and IIR rules apply to fiscal years starting as from 31 December 2023, the UTPR rules apply to fiscal years starting as from 31 December 2024 (see: Belgian law adopted on the Pillar 2 minimum taxation - KPMG Belgium). Furthermore, the UTPR does not apply before 2026 if the Ultimate Parent Entity (UPE) is established in a jurisdiction which has a nominal corporate income tax rate of at least 20% (see: Belgian Law on minimum taxation amended - KPMG Belgium).

The appeal challenges the obligation of Belgian entities of an MNE group to pay a UTPR top-up tax on low taxed profits of other group entities located outside Belgium, without considering the financial position of the Belgian constituent entity. It is argued that this obligation violates several rights and legal principles.

The Belgian Constitutional Court considered that the UTPR provisions in the Belgian Law on minimum taxation are based on those of the EU Directive, and that the Court is not competent to rule on the validity of an EU directive. Accordingly, it decided to raise a prejudicial question to the Court of Justice of the EU. More specifically, the Court asks whether Art. 12 to 14 of the EU Directive are compatible with various European rights and legal principles (incl. the right to property, the principle of equality and non-discrimination, the freedom of establishment and the freedom to provide services, the principle of legal certainty, and the principle of fiscal territoriality), insofar as those provisions require Member States to levy a UTPR top-up tax on constituent entities established in the EU, and making these entities liable for paying tax on undertaxed profits of other group entities established in another jurisdiction, without taking into account the financial position of the former constituent entities.

The referral of the Belgian Constitutional Court comes at a time when there is no longer undivided consensus about the implementation of the GloBE rules and the USA has raised serious concerns. In this light, on 28 June 2025 the G7 (i.e, Canada, France, Germany, Italy, Japan, the United Kingdom and the USA) released a statement which outlines a shared understanding of a “side-by-side” solution to address the US concerns. This shared understanding is said to be based on four accepted principles, one of which is that US parented groups would be fully excluded from the UTPR and IIR in respect of both domestic and foreign profits.

The statement has relevance to a wider group of jurisdictions and, accordingly, the “shared understanding” needs to be discussed within the Inclusive Framework with a view to reaching a solution that is acceptable and implementable to all. Details of a technical solution are yet to be elaborated. Whether this will result in any changes to the EU Directive is yet to be seen and hard to predict. This conclusion also applies with respect to the UTPR provisions challenged in this Belgian case. For the time being, the fact is that the EU Directive is transposed into national legislation of EU Member States and the rules are effective.

Notwithstanding the above, the Belgian Law on minimum taxation remains applicable and the first compliance deadline is quickly approaching. While the Belgian GloBE rules are aligned with those of the EU Directive and the OECD GloBE Model, the deadline for submitting the QDMTT return is much earlier than in other countries, i.e., 11 months following the fiscal year (see also Belgian DMTT-return template - KPMG Belgium ). The Belgian Tax Administration is currently in the process of setting up the necessary IT infrastructure and the submission of the QDMTT return is expected to be possible as from September 2025. Before that, further information and guidance is expected to be released by the Tax Administration.

It is important for each MNE-group which is in scope of the Belgian Law on minimum taxation to understand the compliance requirements, considering especially the first filing deadline for the QDMTT-return in November 2025. KPMG can help you with understanding the implications of the rules and support you with all compliance aspects, including the generation and submission of the QDMTT return.

If you have any questions related to the Belgian minimum taxation or need assistance, do not hesitate to reach out to your trusted KPMG advisor or contact us.