BELGIAN SYSTEM OF NOTIONAL INTEREST DEDUCTION IN CONFLICT WITH EU-LEGISLATION
03 July 2013
The Court of Justice of the European Union made a decision on the case concerning Argenta Spaarbank NV (C-350/11) and has stated that the Belgian system of notional interest deduction (NID) is in conflict with the European principle of the freedom of establishment. The Court thus concluded in the same way as the European Commission did in its recommendation in the beginning of 2012.
The discussion concerns the fact whether or not the equity attributable to a foreign (EEA) permanent establishment of a Belgian company, has to be taken into account in the calculation base for the NID.
According to the current Belgian tax legislation, a Belgian company who has for example a permanent establishment in France, has to exclude the equity of this permanent establishment when calculating the NID. On the other hand, a Belgian company with a Belgian permanent establishment is entitled to include the equity of this permanent establishment when calculating the NID. For this reason Belgian companies may be discouraged to open a permanent establishment abroad.
The Minister of Finance has already confirmed that the decision of the Court has been noted and that he will propose the necessary law amendments after the summer recess.
For more details in this respect, please contact your BDO contact person or your tax contact person of your BDO office.