Euro Tax Flash from KPMG's EU Tax Centre

CJEU – Regulation (EU) 2022/1854 – Temporary solidarity contribution – Equivalent national measures – Article 122 TFEU – Legal certainty – Fundamental rights – Windfall profits – Energy crisis measures – EU law 

Article 122(1) TFEU is an appropriate legal basis

Both the Belgian and Irish cases questioned whether Chapter III of Regulation 2022/1854 could validly be adopted on the basis of Article 122(1) TFEU, which allows the Council, in a spirit of solidarity between Member States, to adopt appropriate measures where severe difficulties arise in the supply of certain products, notably in the area of energy. The AG concluded that the Regulation was validly adopted under that Article because it addressed an exceptional economic and energy crisis, pursued objectives directly linked to mitigating the consequences of that crisis, was temporary in nature, and reflected the solidarity principle underpinning Article 122. The AG considered that difficulties in the supply of energy products may also arise where exceptionally high prices affect access to those products for consumers and businesses.

Fiscal nature of the temporary solidarity contribution

The AG acknowledged that the temporary solidarity contribution displays fiscal characteristics. However, the AG considered that its principal objective was to address the energy crisis rather than to harmonize direct taxation. The AG therefore concluded that the measure could validly be adopted on the basis of Article 122(1) TFEU and did not require unanimity within the Council.

The temporary solidarity contribution is compatible with legal certainty, legitimate expectations and non-retroactivity

The AG concluded that neither Regulation 2022/1854 nor the Irish implementing legislation infringes the principles of legal certainty, legitimate expectations or non-retroactivity. Whilst the Irish legislation had retroactive effect in relation to fiscal year 2022, the AG considered that such retroactivity was justified by the general-interest objective pursued and did not undermine taxpayers' legitimate expectations, in particular because Regulation 2022/1854 had already been adopted in October 2022 and expressly provided for the application of the contribution to 2022 profits.

The Irish contribution was considered proportionate and compatible with fundamental rights

The AG considered that neither the 75 percent rate applicable to surplus profits nor the restrictions on the use of historical losses rendered the Irish measure disproportionate or incompatible with the right to property and the freedom to conduct a business. In assessing the burden imposed, the AG emphasized the temporary nature of the contribution and considered the effective rather than merely the nominal tax rate to be relevant. He also considered that allowing historical losses to reduce the contribution could undermine the objective of financing measures adopted in response to the energy crisis.

Member states retain flexibility when implementing equivalent national measures

The AG reasoned that Article 14 of Regulation 2022/1854 allows Member States to adopt national measures that differ from the EU solidarity contribution, provided they pursue similar objectives and generate comparable or higher proceeds. The opinion therefore provides important guidance on the discretion available to Member States when responding to exceptional economic circumstances (for example, by extending the scope the contribution to other economic operators).

The plaintiff is a Lithuanian entity wholly owned by a Cypriot parent company (HoldCo One). In 2016 and 2017, the parent company received dividends from the plaintiff and another Lithuanian entity. The plaintiff considered that the payments were exempt from dividend withholding tax under the local rules implementing the Parent-Subsidiary Directive (PSD).

In February 2017, the shares in HoldCo One were sold by a Belize company, the grandparent of the Lithuanian plaintiff, to a newly set-up Cypriot entity (HoldCo Two) while the purchase price remained payable by HoldCo Two (the loan). Despite this sale, the ultimate beneficial owner of the dividends (UBO), an individual not resident in Lithuania, who owned both the Belizean and Cypriot companies, remained unchanged. Following the sale, the Belize company assigned the loan to the UBO.

In 2017 and 2018, HoldCo Two granted loIn October 2022, the EU adopted Regulation (EU) 2022/1854 as part of its response to the increase in energy prices following Russia's invasion of Ukraine. The Regulation introduced two distinct temporary measures:

1. First, it capped revenues earned by certain electricity producers from the sale of electricity.
2. Second, it introduced a temporary solidarity contribution on surplus profits generated in 2022 and 2023 by companies operating in the crude petroleum, natural gas, coal and refinery sectors.

The contribution applied to profits exceeding by more than 20 percent the average taxable profits recorded during the four preceding fiscal years and was intended to capture a portion of the windfall profits generated during the energy crisis. Revenue from the measure was to be used to support households, businesses and the wider economy affected by high energy prices.

The Regulation was adopted on the basis of Article 122(1) TFEU. Whilst the temporary solidarity contribution constituted a mandatory EU measure, Article 14 of the Regulation allowed Member States to apply an equivalent national measure, provided that it pursued comparable objectives and generated comparable or higher proceeds. Several Member States made use of the flexibility provided under the Regulation to adapt the temporary solidarity contribution at national level¹.

In Belgium, Ireland and Italy, national measures adopted in connection with the temporary solidarity contribution were challenged before domestic courts, as follows:

• The Belgian and Irish courts sought guidance on the validity of Regulation (EU) 2022/1854, including whether Article 122(1) TFEU provided an appropriate legal basis for its adoption. The Belgian proceedings also concern the conditions under which a national measure implementing (in part) the Regulation can:
  • qualify as an equivalent national measure,
  • constitue a prohibited charge that has an equivalent effect to a custom duty,
  • constitute a discriminatory domestic tax,
  • confers a selective advantage, which constitutes State aid.
• The Irish proceedings focus on the general principles of EU law of proportionality, legal certainty and non-retroactivity as well as the compatibility of the Regulation and the Irish implementing legislation with the freedom to conduct a business and the right to property under the Charter of Fundamental Rights of the European Union.

Finally, the Italian proceedings raise separate questions concerning the scope of Member States' discretion when extending equivalent national measures to operators not expressly covered by the Regulation, including certain undertakings active in the electricity and energy distribution sectors.

Validity of Article 122 (1) TFEU as the legal basis and the fiscal nature of the temporary solidarity contribution – C-358/24 (Belgium) and C‑533/24 (Ireland)

The referring courts in the Belgian and Irish cases, respectively, questioned whether Article 122(1) TFEU constituted an appropriate legal basis for the adoption of Regulation 2022/1854, including the temporary solidarity contribution established by Chapter III.

The AG began by recalling that Article 122(1) TFEU allows the Council to adopt appropriate measures in a spirit of solidarity between Member States where severe difficulties arise in the supply of certain products, notably in the energy sector. He further noted that the validity of the legal basis must be assessed in light of the purpose and content of the measure concerned.

The AG first considered that Regulation 2022/1854 addressed an emergency and exceptional economic situation within the scope of Article 122(1) TFEU. In the AG’s view, difficulties in the supply of energy products are not limited to their direct availability to Member States but also cover situations where exceptionally high prices prevent consumers and businesses from accessing those products. The AG also considered that the Regulation pursued an economic objective. In his view, the measures introduced by the Regulation, including the solidarity contribution, sought to ensure security of energy supply, mitigate the effects of high energy prices on the economy and contribute to the affordability of energy for Member States, households and businesses.

Second, the AG observed that, whilst Article 122(1) TFEU does not expressly require measures adopted on that basis to be temporary, such a requirement follows from the purpose of the provision itself. He considered that this condition was met, noting that Regulation 2022/1854 was expressly limited in duration and that the solidarity contribution applied only to surplus profits generated during the fiscal years 2022 and 2023.

Third, the AG considered that the requirement under Article 122(1) TFEU that measures be "appropriate to the economic situation" reflects the principle of proportionality and noted that the EU institutions enjoy a broad margin of discretion in areas involving complex economic assessments. He concluded that the temporary solidarity contribution was appropriate and necessary to address the effects of the energy crisis. In particular, the AG rejected the view that the measure merely generated additional budget revenue, emphasizing that it was designed to finance measures mitigating the impact of the crisis and that Member States are required to use the proceeds for that purpose. The AG also considered that the contribution did not go beyond what was necessary, as it applied only to a portion of undertakings' surplus profits, allowing them to retain part of those profits for investment and financial stability.

Fourth, the AG concluded that the Regulation satisfied the requirement under Article 122(1) TFEU that measures be adopted in a spirit of solidarity between Member States. He recalled that solidarity is a fundamental principle of EU law that requires consideration of both the interests of individual Member States and those of the Union as a whole. Against that background, he considered that the Regulation reflected a coordinated EU response to the energy crisis by requiring all Member States to contribute to mitigating the impact of high energy prices on consumers and businesses, while helping to prevent further fragmentation of the internal market and preserve the sustainability of public finances

The AG therefore concluded that Regulation 2022/1854, including Chapter III thereof, was validly adopted on the basis of Article 122(1) TFEU and complied with the conditions laid down by that provision.

The two cases also raised the question of whether a measure such as the temporary solidarity contribution could validly be adopted on the basis of Article 122(1) TFEU given its fiscal nature, or whether Article 115 TFEU, which provides for unanimity in the Council in the context of the approximation of national laws affecting the internal market, should instead have been used.

The AG first noted that, once the conditions for relying on Article 122(1) TFEU are satisfied, the fact that another Treaty provision could potentially have served as a legal basis is not decisive. In his view, Article 122(1) TFEU constitutes a specific legal basis allowing the Council to adopt appropriate measures to address exceptional economic crises.

The AG acknowledged that the temporary solidarity contribution is of a fiscal nature. However, he emphasized that neither the wording nor the purpose of Article 122(1) TFEU excludes fiscal measures from its scope. He further recalled that, whilst direct taxation remains primarily within the competence of the Member States, the EU is not deprived of all powers in the field of taxation where a Treaty legal basis exists.

The AG also rejected the view that the fiscal nature of the contribution required recourse to Article 115 TFEU. In his view, the temporary solidarity contribution could not be assessed in isolation but had to be examined in the context of the broader package of emergency measures established by Regulation 2022/1854. He considered that the main objective of Chapter III was not to harmonize national tax systems but to mitigate the effects of the energy crisis, with any fiscal objective being merely incidental to that broader economic objective.

Finally, the AG considered that the fiscal nature of the contribution did not trigger a requirement for unanimity within the Council. The AG recalled settled CJEU case law based on which it is not procedures that define the legal basis of a measure but the legal basis of a measure that determines the procedures to be followed. Since Regulation 2022/1854 was validly adopted on the basis of Article 122(1) TFEU, the applicable voting procedure was therefore qualified majority voting.

The AG therefore concluded that Regulation 2022/1854, including Chapter III thereof, was adopted within the limits of the powers conferred on the EU and in accordance with the procedure laid down by Article 122(1) TFEU.

Legal certainty, legitimate expectations and non-retroactivity - C‑533/24 (Ireland)

The Irish proceedings also raised questions as to whether Chapter III of Regulation 2022/1854 and the Irish implementing legislation comply with legal certainty and non-retroactivity, as general principles of EU law².

The AG first distinguished between the temporary solidarity contribution established by Regulation 2022/1854 and the Irish legislation implementing that contribution. As regards the Regulation, he rejected the argument that the contribution operated retroactively. Regulation 2022/1854 entered into force on October 8, 2022, before the end of the 2022 fiscal year, and expressly provided for the application of the contribution to profits generated during fiscal years 2022 and 2023. The AG considered that the tax treatment of the profits could only be determined once they had been fully realized at the end of the fiscal year. The contribution therefore applied to the future effects of an ongoing situation rather than to a situation already definitively established. He also emphasized the ad hoc and exceptional nature of the contribution, which was not intended to amend the ordinary tax regime applicable to the undertakings concerned.

By contrast, the AG acknowledged that the Irish implementing legislation entered into force in August 2023 and applied to profits realized during fiscal year 2022 and therefore had retroactive effect in relation to that year. However, the AG considered that such retroactivity was justified and therefore compatible with EU law. In particular, he emphasized that the temporary solidarity contribution pursued an objective of general interest, namely mitigating the effects of the energy crisis, and that Regulation 2022/1854 had already been adopted in October 2022 and expressly envisaged the application of the contribution to 2022 profits. The AG therefore considered that the undertakings concerned could not have legitimately expected that those profits would remain unaffected by the contribution.

The AG further recalled that legal certainty and the protection of legitimate expectations require legal rules to be sufficiently clear and foreseeable, but do not prevent either the EU legislature or Member States from responding to exceptional circumstances. In his view, Regulation 2022/1854 defines with sufficient precision the scope of the temporary solidarity contribution and the conditions governing its application. He also noted that the undertakings concerned had received no specific assurances that the exceptional profits generated during the energy crisis would remain unaffected by legislative intervention and that, in those circumstances, a prudent economic operator could not legitimately expect the existing legal or economic situation to remain unchanged.

Proportionality and fundamental rights to property and freedom to conduct a business – C-533/24 (Ireland)

The Irish High Court further asked whether Chapter III of Regulation 2022/1854 and the Irish implementing legislation were compatible with the principle of proportionality³ and with the freedom to conduct a business and the right to property guaranteed by Articles 16 and 17 of the Charter of Fundamental Rights of the European Union (the Charter)⁴.

The AG accepted that the surplus profits subject to the contribution are "possessions" within the meaning of Article 17 of the Charter, regardless of their exceptional nature, since they had actually been received by the undertakings concerned. He also acknowledged that the contribution constitutes an interference with the right to property. However, the AG considered that the interference was provided for by law, respected the essence of that right, pursued an objective of general interest and was proportionate. In particular, the contribution was temporary and applied only to the portion of profits exceeding the threshold laid down by the Regulation, leaving part of the profit margin available for future investment and financial stability.

As regards the freedom to conduct a business, the AG considered that the contribution did not, in itself, constitute a restriction on that freedom, since its application to surplus profits was not capable of affecting the undertakings' investment capacity or their ability to carry on their activities. He added that, even if the contribution were regarded as a restriction, it would be justified on the same grounds.

With regard to the Irish implementing legislation, which set the temporary solidarity contribution at 75 percent of surplus profits and restricted the use of historical losses in determining the contribution, the AG noted that Member States enjoy considerable discretion in implementing the Regulation and that, in that context, only a manifest error of assessment could be sanctioned. The 75 percent rate applies only to surplus profits, which means undertakings retain part of the profits made. The AG noted that case law of the European Court of Human Rights does not suggest that such a rate is in itself excessive or confiscatory, and the contribution applies to only two fiscal years. He added that a tax measure must be assessed by reference to the effective rather than the nominal tax rate. Because historical losses were offset, the applicants paid no corporation tax on their 2022 and 2023 profits, so their overall effective tax rate on 2022 profits was 25.2 percent.

The AG also considered that excluding losses incurred prior to 2018 from the tax base did not go beyond what was necessary to achieve the Regulation's objectives, since allowing such losses to be deducted could have substantially reduced, or even eliminated, the contribution, thereby undermining the objective of financing of national support measures adopted in response to the energy crisis

The AG therefore concluded that neither Chapter III of Regulation 2022/1854 nor the Irish implementing legislation setting the contribution at 75 percent and restricting the use of historical losses infringed upon the principle of proportionality or the rights guaranteed by Articles 16 and 17 of the Charter.

Equivalent national measures under Article 14 of Regulation 2022/1854: personal scope and calculation method - C‑358/24 (Belgium) and C‑153/25 (Italy)

The Belgian and Italian constitutional courts, respectively, asked under what conditions a national levy may qualify as an "equivalent national measure" within the meaning of Article 14(2) of Regulation 2022/1854. They asked in particular whether such a measure may apply to a wider group of taxpayers than the EU contribution.

The AG first observed that the EU legislature intended the contribution to cover only undertakings active in the crude petroleum, natural gas, coal and refinery sectors, and that the same applies to equivalent national measures. However, Member States remain free, within their own tax competence, to extend a national levy to other categories of operators. In his view, such an extension is permissible provided that (i) it does not call into question the equivalent character of the measure with regard to the undertakings covered by Article 14(1) of the Regulation and (ii) for those undertakings, the measure satisfies the requirements of the Regulation. The AG also considered it reasonable for a Member State to take account of the characteristics of its national market. Where a covered sector, such as natural gas and coal extraction in Belgium, is absent or marginal, the State may extend the levy to distributors of certain petroleum products that made exceptional profits, as long as comparable or higher proceeds are generated.

As regards the calculation method, the AG considered that Article 14(2) does not require an equivalent national measure to be based on taxable profits. The Belgian levy was calculated on volumes of crude oil processed or petroleum products released for consumption. In the AG's view, it can still qualify as an equivalent national measure for refinery companies, provided it imposes a burden comparable to the EU contribution on their surplus profits. If Member States had to replicate the EU contribution exactly, the option of adopting an equivalent measure would have no independent meaning. The AG added that the proceeds of an equivalent measure may not be lower than those resulting from applying a rate of at least 33 percent to surplus profits. The Belgian measure provided for a compensation mechanism designed to ensure this, which the referring court must verify. He also considered that the Belgian measure pursued similar objectives, as it aimed to support households and businesses affected by high energy prices. However, the qualification as an equivalent national measure does not extend to the oil companies designated as "primary participants", because they fall outside the personal scope of Article 14(1). For those companies the Belgian measure does not implement EU law, and the AG therefore considered that the Charter does not apply and that the Belgian court's equal treatment question did not need to be answered.

In the Italian case, the national levy also applied to electricity producers, energy resellers and importers. Some of these operators were already subject to the cap on market revenues under Article 6 of the Regulation. The AG considered that such cumulative application is not, in principle, precluded, since Article 8 of the Regulation expressly allows Member States to further limit the market revenues of those producers, provided the conditions of Article 8(2) are met. It is for the referring court to verify whether those conditions are satisfied.

Customs duties and discriminatory internal taxation - C‑358/24 (Belgium)

The Belgian Constitutional Court asked, first, whether the contribution imposed on oil companies designated as primary participants for diesel, gas oil and petrol constitutes a charge having equivalent effect to a customs duty under Article 30 TFEU⁵. The AG answered this question in the negative. The contribution is not triggered by the products crossing a border or being imported, but is calculated by reference to the quantities of petroleum products processed or released for consumption. Moreover, it applies according to the same criteria irrespective of the products’ origin or destination. The fact that Belgium does not extract crude petroleum, and that the contribution therefore applies in practice primarily to imported petroleum, does not alter that conclusion.

The Belgian court also asked whether the contribution constitutes discriminatory internal taxation prohibited under Article 110 TFEU⁶. The AG likewise answered this question in the negative. The contribution is based on objective criteria, namely the quantities of petroleum products processed or released for consumption, and does not distinguish between products according to their origin. Furthermore, the referring court had not identified any similar domestic products that were taxed more favourably or competing domestic products that received indirect protection. The differing treatment of certain petroleum products, such as paraffin and lamp oil, was also based on objective considerations. Subject to verification by the Belgian court, the contribution therefore does not tax products from other Member States more heavily than similar domestic products or indirectly protect competing domestic products.

State aid - C‑358/24 (Belgium)

Finally, the Belgian court also asked whether the Belgian measure constitutes new State aid that should have been notified to the Commission under Article 108(3) TFEU⁷. The AG considered that a national measure introducing a temporary solidarity contribution does not constitute State aid within the meaning of Article 107(1) TFEU⁸, provided that it does not treat differently operators that are in a comparable factual and legal situation in light of the objective pursued. Because no selective advantage was identified, the AG did not find it necessary to examine whether a difference in treatment could be justified by the nature or general scheme of the tax system.

The three opinions issued by AG Rantos are particularly significant for the interpretation of Article 122(1) TFEU and, if upheld by the CJEU, may also be relevant to the design of future crisis-response measures. The AG is of the view that a measure with fiscal characteristics may be adopted on that legal basis, provided that its principal objective is to respond to an exceptional economic situation rather than to harmonize taxation. However, the AG placed considerable emphasis on the exceptional circumstances surrounding the energy crisis, the temporary nature of the measures and the direct link between the contribution and the financing of measures intended to mitigate the effects of that crisis.

The opinions are also particularly timely in light of renewed discussions on the taxation of windfall profits in the energy sector, as higher prices have prompted calls for actions at EU level. Austria, Germany, Italy, Poland, Portugal and Spain have called for an EU-level discussion on potential additional taxation of oil and gas companies’ windfall profits. While EU finance ministers agreed in October 2026 to further examine possible approaches, the European Commission has maintained its position that decisions on introducing windfall taxes are primarily for individual Member States. Current EU-level work is therefore focused on examining potential options, facilitating the exchange of best practices and supporting Member States in assessing national measures. For previous coverage of these discussions, please refer to our E-News Issue 237.

Several Romanian measures concerning windfall taxation are also the subject of pending CJEU proceedings. In case C‑588/25, a Romanian court asked the CJEU to clarify the scope of the sectors and activities covered by Article 14 of Regulation (EU) 2022/1854 and whether national legislation may impose the solidarity contribution solely by reference to a taxpayer’s NACE code. The Romanian referral therefore concerns questions that differ from those addressed in the three opinions issued by AG Rantos. Nevertheless, the CJEU’s future rulings may collectively provide further guidance on the scope, implementation and limits of windfall taxation under EU law. For previous coverage of the Romanian referral, please refer to E-News Issue 223.

For the time being, decisions on whether and how to introduce new windfall taxes therefore remain primarily with Member States, subject to compliance with EU law. Against this background, the CJEU’s eventual ruling on the validity of the legal basis used for the 2022 temporary solidarity contribution may be particularly relevant should a similar EU-level intervention be considered in the future. If the Court follows the AG’s reasoning, it would provide greater clarity on the circumstances in which Article 122(1) TFEU may be relied upon, while the emphasis placed on the exceptional and temporary nature of the 2022 intervention would remain an important limitation.

Should you have any queries, please do not hesitate to contact KPMG’s EU Tax Centre or, as appropriate, your local KPMG tax advisor.