BASF mulling over implications of ruling on Belgian tax scheme

04-Aug-2016 - Last updated on 30-Aug-2016 at 12:44 GMT

'We are closely following developments while considering our legal options,' says BASF Image © iStock/Zerbor

BASF is one of the firms hit by the EU Commission’s decision in January finding Belgium’s tax arrangements for multinationals were illegal and that the tax must be repaid

The EU executive ruled that Belgium must recover some €700m ($785m) from the 35 multinationals that benefited from the scheme.

Today, our sister site, NutraIngredients, reported that capsule manufacturer, Capsugel, and, at least, six others of the companies involved are contesting the Commission’s decision in an EU court.

But BASF has proved non-committal on whether it too intends to take legal action against the Commission. “We are closely following developments while considering our legal options,” a spokesperson for that German company told us today.

The chemical giant said it does not tend to give information on its tax situation in individual countries.

Germany headquartered amino acid maker, Evonik, was also listed as a beneficiary of the Belgian system. A spokesperson for that company told us it acted in accordance with the current legal regulations. "The Excess Profit Ruling was legal and was approved by the Belgian federal government," added the Evonik representative.

Scheme in place for 11 years

The Belgian tax scheme has been in place since 2005. It enabled some multinational companies to reduce their corporate tax base by between 50% and 90% as these were seen as 'excess profits' in that the Belgian operations were part of a multinational group.

The Commission said the multinational firms thus received preferential treatment, getting a significant reduction in tax compared to stand-alone companies operating in Belgium.

Meanwhile, on 19 July, the EU General Court of Justice dismissed the Belgian government’s appeal for temporary suspension of the Commission’s decision, while awaiting judgment from the same court on its application, lodged in March, to have the Commission’s ruling quashed.

Belgium argued that suspension of the decision was warranted because of the legal uncertainty arising out of the Commission’s move, the damage that could be wrought to its economy from firms no longer investing in the country, and the administrative burdens the collection of taxes and any potential litigation by companies contesting the move would place on its administration.

The EU General Court concluded that Belgium failed to provide evidence to back up such claims and rejected any interim measures.

Firms told to identify possible risks…

In January this year, Dr Salomé Cisnal de Ugarte and David B Blair, of legal firm, Crowell & Moring, warned firms benefiting from tax rulings like the ‘Only in Belgium’ scheme should seek legal advice to identify possible risks and limit the scope of potential liabilities.

They noted that, in 2015, the Commission started using new investigative tools, introduced by Regulation 734/2013, to obtain further details about tax schemes throughout the EU. It sent out requests for information to the EU-28 seeking data on the tax rulings granted to companies between 2010 and 2013.

Based on the widespread use of tax schemes for transfer pricing across the EU, the Commission may well open further probes into potential tax violations by other EU countries, warned the legal experts.

Since 2013, the Commission has been reviewing the tax ruling programs of various EU countries. In 2014, it opened investigations into tax arrangements Luxembourg had granted to Amazon and Fiat Finance, Ireland to Apple, and the Netherlands to Starbucks.