Belgium's "fairness tax" did not breach the freedom of establishment.
The Court of Justice of the European Union (CJEU) on December 19, 2024, held (C-436/23) that the Belgian “fairness tax” was compatible with EU law.
Background
Belgium introduced the fairness tax in 2013 as a separate liability from corporate income tax, targeting companies whose profits were reduced through specific tax deductions. In 2018, the Belgian Constitutional Court annulled the tax but maintained its effects from 2014 to 2018. A Belgian subsidiary of a multinational group challenged the tax for 2015 and 2016, and the Ghent Court of Appeal found that as a result of the Constitutional Court’s decision, the fairness tax remained applicable only to the subsidiaries of nonresident companies conducting business operations in Belgium, but not to nonresident companies that operated in Belgium through a permanent establishment (PE) or branch. The Court of Appeal raised concerns on whether this difference in treatment was compatible with EU law and referred the matter to the CJEU for a preliminary ruling.
CJEU judgment
The CJEU acknowledged Belgium's argument that the tax actually applied to PEs of nonresident companies, but it based its analysis on the findings of the referring court that the tax applied only to subsidiaries of nonresident companies. The CJEU concluded that the tax's differential treatment did not breach the freedom of establishment, as nonresident companies with PEs were not in a comparable situation to resident subsidiaries, including subsidiaries of nonresident companies.
Read a February 2025 report prepared by KPMG’s EU Tax Centre