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Commission Investigates Tax Exemptions Given To Certain Belgian Companies

Wednesday, 11 December 2013   (0 Comments)
Posted by: Author: Chartered Accountants Ireland
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Author: Chartered Accountants Ireland

The European Commission has opened an in-depth investigation to determine whether Belgium’s implementation of a system of support for innovative companies is in line with EU rules on state aid. The Commission will examine in particular the terms on which a certain number of Belgian companies have benefited from tax relief. The opening of an in‑depth investigation gives third parties an opportunity to comment on the measure under assessment. It does not prejudge the outcome of the investigation.

In 2006 the Commission approved a support scheme for research and development (R&D) that exempted certain innovative companies (‘Young Innovative Companies’) from paying payroll tax on part of the remuneration paid to their scientific personnel. Belgium had pledged to incorporate into its national legislation the definitions of the types of research eligible for tax breaks under European rules on state aid for research, development and innovation (R&D&I) (see IP/06/1600 and MEMO/06/441).

During a screening exercise started in 2011 the Commission found that Belgium had not introduced these definitions until 2013, seven years after the scheme began. Providing tax breaks to innovative companies without these definitions does not allow aid to be targeted on the R&D objective that justifies its granting and guarantees that distortion of competition can be limited. The aid granted would therefore appear to have conferred an undue advantage on the beneficiary companies, which is contrary to the state aid rules on R&D&I.  At this point in the investigation, Belgium has not provided sufficient information to dispel the Commission’s doubts.

Moreover, the Belgian authorities failed to notify the Commission when they tacitly renewed the scheme after its expiry in July 2011 and increased the level of tax relief.


European rules on R&D classify research in the categories of ‘fundamental research’, ‘industrial research’ and ‘experimental development’, each type of research entitling beneficiary companies to a given level of aid.

To qualify as a Young Innovative Company, a company must be small, have existed for less than 10 years and spend at least 15% of its total costs on R&D.

Payroll tax is deducted at source by an employer from the salaries paid to its employees and is paid to the state.

The non-confidential version of the decision will be made available under the case number SA.20326 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. The electronic newsletter ‘State Aid Weekly e-News’ lists the most recent decisions on state aid published in the Official Journal and on the website.

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