The CJEU judgment may provide refund opportunities for affected taxpayers.
The Belgian notional interest deduction regime consists of allowing a deduction for a percentage of the adjusted equity capital of a company, from the basis of its assessment for corporate income tax. The equity capital is then reduced by the net value of the assets of permanent establishments, the income of which is exempt from Belgian tax by virtue of an income tax treaty.
In the case before the CJEU, the taxpayer in calculating its notional interest deduction, was unable to take into account that part of its equity capital equal to the assets of its Dutch permanent establishment (whereas had the permanent establishment (PE) been established in Belgium, no reduction in respect of the permanent establishment’s assets would have to be made).
The CJEU concluded that the disputed Belgian rules discourage a Belgian company from conducting its activity through a PE located in another EU Member State and, consequently, are in breach of the EU freedom of establishment.
As a result of the CJEU judgment, there may be refund opportunities for Belgian companies with tax exempt PEs that have been precluded from using the notional interest deduction calculated on the net assets of these PEs. These taxpayers may now consider filing claims for refunds of the excess tax that has been paid in the past five years by means of an ex officio waiver request.
Read a July 2013 report [PDF 52 KB] prepared by KPMG’s EU Tax Centre: CJEU decision in Argenta Spaarbank case
Read also a July 2013 report prepared by the KPMG member firm in the Netherlands: CJEU judgment on application of Belgian notional interest deduction to Dutch permanent establishment