2005/378/EC: Commission Decision of 8 September 2004 concerning the aid scheme which Belgium is proposing to implement for coordination centres (notified under document number C(2004) 3348)  (Text with EEA relevance)
Date: 2004-09-08
Institutions: European Commission
Subjects: Belgium, State aid, control of State aid, corporation tax, tax exemption

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COMMISSION

COMMISSION DECISION

of 8 September 2004

concerning the aid scheme which Belgium is proposing to implement for coordination centres

(notified under document number C(2004) 3348)

(Only the French and Dutch texts are authentic)

(Text with EEA relevance)

(2005/378/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty
establishing the European
Community, and in particular the first subparagraph of Article
88(2) thereof,

Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments
pursuant to the provisions cited above (1), and having regard to
their comments,

Whereas:

(1)

(2)

I. PROCEDURE

for business

On 1 December 1997 the Council adopted a code of
taxation (2) and requested the
conduct
Commission to examine or re-examine the tax systems
in force in the Member States. On 11 November 1998
the Commission adopted a notice on the application of
the State aid rules to measures relating to direct business
taxation (3).

Belgian Royal Decree No 187 of 30 December 1982
provides for a tax scheme derogating from ordinary
law for approved coordination centres
(coordination
centres or centres). The group set up by the Council in
accordance with point H of the code of conduct for
code of
taxation (Council group on the
business

(1) OJ C 209, 4.9.2003, p. 2.
(2) OJ C 2, 6.1.1998, p. 1.
(3) OJ C 384, 10.12.1998, p. 3.

tax

competition measure.

the scheme constituted a
conduct) considered that
the
harmful
investigation procedure
Commission opened a formal
into the scheme on 27 February 2002. The procedure
was closed on 17 February 2003 by Commission
Decision 2003/755/EC, a final negative decision (4).

Similarly,

(3)

(4)

Pursuant to Article 88(3) of the Treaty, Belgium notified
by letter dated 16 May 2002, the part of a preliminary
draft
law amending Royal Decree No 187 so as to
comply with the criteria laid down by the Council
group on the code of conduct. This is therefore a new
scheme for coordination centres, which is intended to
replace that
in force since 1983. The Law amending
the system for companies with regard to income taxes
and instituting a system of advance decisions on tax
matters (5) was promulgated on 24 December 2002.
According to Article 32 of the Law, the date for the
entry into force of Article 29, which contains
the
amendments to Royal Decree No 187, will be fixed by
royal decree at a later stage.

On 23 April 2003, after several exchanges of corre-
spondence and meetings aimed at obtaining further
information (6), the Commission ruled on the notified
scheme. The Decision authorised certain aspects of the
scheme and initiated the procedure laid down in Article
88(2) of the Treaty with regard to three other aspects of
the scheme. The authorisation related to: 1. the principle
of prior approval for the centres for a 10-year period; 2.
the principle that advance decisions valid for five years
should be granted to the centres; and 3. the principle that
the ‘cost plus’ flat-rate method should be used for calcu-
lating the tax base, provided that the use of this method
guarantees comparable taxation to that obtained, for an
independent company, by applying the rules of ordinary
law (7). The procedure was initiated with regard to: 1. the

(4) OJ L 282, 30.10.2003, p. 25.
(5) Moniteur Belge, 31.12.2002 (Ed 2), p. 58 817.
(6) For details, see the initiating Decision (footnote 1 of this Decision).
(7) For the detailed considerations underlying this approval, see the

initiating Decision (footnote 1 of this Decision).

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specific exemption from withholding tax; 2. the specific
exemption from capital duty, and 3. the non-taxation of
the abnormal and gratuitous advantages accorded to the
centres.

exceptional measures
exceptional and gratuitous advantages).

(withholding tax, capital duty,

(5)

(6)

(7)

(8)

The Commission Decision to initiate the procedure (the
initiating Decision) was published in the Official Journal of
the European Union (8).The Commission invited interested
parties to submit their comments on the measure in
question.

(11)

By letter dated 15 July 2003,
forwarded by the
Permanent Representation of Belgium to the European
Union on 27 July, the Belgian authorities communicated
their comments within the time limit, which had been
extended in response to their request.

By letter dated 17 October 2003, the Commission trans-
mitted to Belgium the comments received from third
parties. Belgium gave its comments on these by letter
dated 14 November 2003.

(12)

four

By letter dated 24 November 2003, the Commission
transmitted to the Belgian authorities its preliminary
technical meetings (9) between
comments. After
Commission officials and representatives of the Belgian
tax administration, new proposals were formulated by
the Belgian authorities. An additional meeting was held
on 6 May 2004 between the Belgian Prime Minister, the
Minister for Finance and the Commissioner responsible
for competition.

Following the discussions between the Commission and
Belgium, the latter undertook to abolish the withholding
tax and capital duty exemptions specific to coordination
centres as provided for by the Law of 24 December
2002. Belgium considers, moreover, that the alternative
measures it is proposing to take with regard to with-
holding tax and capital duty are general measures,
whose scope is consequently wider than just coordi-
nation centres, and do not need therefore
to be
notified to the Commission under Article 88(3) of the
Treaty. As
and gratuitous
advantages accorded to centres, Belgium undertakes to
amend the Law of 24 December 2002 so that such
advantages
the
same
similar advantages received by other firms established
in Belgium.

tax treatment as

exceptional

regards

receive

the

the

itself

detailed

proposed

by Belgium,

description. As

to summarising the

For the purposes of this Decision, the Commission will
confine
initial measures
contained in the Law of 24 December 2002 and
would refer the reader to the initiating Decision for a
alternative
more
measures
are
those
described which adapt the coordination centres scheme
as regards the consideration given to exceptional and
gratuitous advantages. Since the proposed measures
concerning withholding tax and capital duty are more
general in scope, they do not constitute an amendment
of the scheme. As they have not been notified, these
measures are neither described in detail nor evaluated
in this Decision.

to the
only

(9)

By letter dated 7 June 2004, Belgium confirmed the
terms of the commitments made on 6 May.

2. The coordination centres scheme following the
Law of 24 December 2002

II. DETAILED DESCRIPTION OF THE SCHEME

1. Introduction

(10) As is clear from the procedural summary in section I, the
scheme which is the subject of
the procedure was
notified to the Commission on 16 May 2002. On
23 April 2003, the Commission approved the scheme
in part and initiated the procedure with regard to three

(13)

The legal basis for the notified scheme is Royal Decree
No 187 of 30 December 1982, as last amended by
Article 29 of the Law of 24 December 2002 (10). Only
centres individually approved in advance by royal decree
are eligible for the scheme. To be approved, a centre
must be part of a multinational group that meets
certain size criteria.
It may conduct certain activities
only and must carry them on for the benefit only of
group members. Approval, or renewal,
is granted to a
centre on request and for a period of 10 years. Approval
is automatically repealed once the centre no longer
satisfies the conditions.

(8) See footnote 1.
(9) On 14 January and 2, 6 and 23 February 2004.

(10) Reminder: this Article’s entry into force will be determined later by

royal decree.

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(14)

exceptional

By derogation from the ordinary tax system (11), Royal
Decree No 187 as amended provides that the taxable
income of approved centres shall be determined at a
flat rate and shall correspond to a percentage of the
in accordance with the ‘cost
operating expenditure,
plus’ method.
gratuitous
or
The
advantages (12) conferred on the centre by the members
of the group are not added to the tax base obtained by
the cost plus method. An alternative base including the
exceptional and gratuitous advantages is calculated never-
theless, in order to limit exceptional transfers of income
to the Belgian coordination centre. Centres’ profits are
taxed at the full rate of corporation tax. The cost plus
method is applied in practice to each centre individually,
in accordance with the arrangements laid down by an
individual advance decision taken by the Federal Public
Service Finance. By ‘advance decision’ is meant the legal
act by which the
Finance
determines, in accordance with current provisions, how
the law will be applied to a situation or particular
operation, described by the taxpayer, which has not yet
produced any fiscal effects. It is valid for five years and
published anonymously. It binds the tax administration
for the future, and cannot entail a tax exemption or
reduction. The rules on advance decisions are set out
in Articles 20 to 28 of the Law of 24 December 2002.

Federal Public Service

(15) Apart from the flat-rate calculation described above, the
following exemptions were also provided for in the
notified provisions: 1. withholding tax is not due on
income from claims or loans or the yield
dividends,
from the sale of intangible movable assets owed by the
centre; 2. contributions to and increases of the centre’s
capital are exempt
from proportional registration tax
(capital duty).

III. REASONS LEADING PARTLY TO APPROVAL AND
PARTLY TO INITIATION OF THE FORMAL PROCEEDING

1. Approval

(16)

In the initiating Decision the Commission approved the
principles in accordance with which advance decisions
on the cost plus arrangements will have to be taken. It
considered that the framework rules provided for by the
Law of 24 December 2002 were not in themselves likely
to give rise to State aid.

2. Initiation of the procedure

(17)

The Commission initiated the procedure with regard to
three other aspects of the coordination centres scheme.
Firstly, it considered that a special advantage seemed to

from the proportional

the ordinary tax rules. Secondly,

be conferred on coordination centres and the groups
they belong to by exemptions from withholding tax
which go beyond the exemptions available to any under-
taking under
it
considered that the exemption, specific to coordination
centres,
tax on contributions
seemed to give them an economic advantage compared
with undertakings which, in the same circumstances, are
subject to it. Thirdly, it considered that the failure to take
into account the exceptional and gratuitous advantages
accorded to centres in the calculation of their tax base, in
addition to the result of applying the cost plus method,
seemed to confer a special advantage on them compared
with companies whose
calculated in
analytical method
accordance with the
(revenue less expenses).

traditional

tax base

is

(18)

The Commission considered,
lastly, that these specific
advantages did not appear to be justified by the nature
or economy of the Belgian tax system and that they
distorted competition and affected intra-Community
trade. Consequently,
the said measures appeared to
constitute aid within the meaning of Article 87(1) of
the Treaty. In addition, since the exceptions referred to
in Article 87(2) and (3) did not apply, the Commission
this stage to be
concluded that such aid seemed at
incompatible with the common market.

IV. COMMENTS AND ALTERNATIVE PROPOSALS FROM
THE BELGIAN AUTHORITIES

(19)

Following the initiating Decision, Belgium explained how
it interpreted the Commission's approval concerning the
cost plus method and undertook to adapt the rules on
withholding tax, capital duty and the exceptional and
gratuitous advantages received.

1. Withholding tax

(20)

Belgium undertakes to abolish the specific application to
coordination centres of the exemption from withholding
tax provided for by the Law of 24 December 2002. It
announced that
intended to replace the specific
exemption by a measure of general scope making it
possible to maintain the exemption granted to centres
while extending it
to other companies established in
Belgium.

it

2. Capital duty

(11) This expression covers all the rules generally applicable for calcu-
lating tax on companies, whether resident or not, established in
Belgium.

(12) The concept of exceptional or gratuitous advantage, used in Article
26 of the Code des Impôts sur les Revenus 1992 (Income Tax
Code),
is explained in No 26/16, Commentaire du Code des
Impôts sur les Revenus (Com.IR 1992).

(21)

Belgium undertakes to abolish the specific application to
coordination centres of the exemption from capital duty
provided for by the Law of 24 December 2002.
It
announced that
intended to replace the specific
exemption by a general measure reducing the rate at
which capital duty will be levied.

it

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3. Exceptional and gratuitous advantages

VI. ASSESSMENT OF THE MEASURES

(22)

(23)

so

the

and

that

exceptional

the coordination centres
Belgium undertakes to adapt
scheme,
gratuitous
advantages accorded to centres are subject to the same
tax rules as the similar advantages received by other
undertakings established in Belgium. Under current law,
all
the exceptional and gratuitous advantages received
will be added to the taxable income obtained by the
cost plus method. The alternative tax base, based in
particular on these exceptional and gratuitous advantages
(see paragraph 15 of
the initiating Decision), will be
abandoned.

V. COMMENTS FROM INTERESTED THIRD PARTIES

Three associations or federations submitted comments on
behalf of the undertakings they represent: these were the
Fédération des
the
American Chamber of Commerce (AmCham) and the
Federation of Coordination, Distribution, Service and
Call Centres (Forum 187).

entreprises de Belgique

(FEB),

(24) Apart from these three associations, 53 centres or groups
owning a coordination centre each submitted comments
to the Commission. Basically, these describe their own
situation and refer for the rest to the comments made by
Forum 187.

(25)

already made

The third parties consider that the measures concerned,
the new scheme for coordination
which are part of
centres, do not meet any of
the four criteria for
describing a measure as aid and generally refer to the
in proceeding C 15/2002,
comments
which was closed by Decision 2003/755/EC. In short,
they consider
the scheme does not confer a
selective advantage likely to harm competition, since all
multinational groups and hence all their competitors can
establish a Belgian coordination centre, or an equivalent
structure in another country, and thus benefit
from
comparable provisions.

that

(26)

Since Belgium has decided to abolish the exemptions
from withholding tax and capital duty in the Law of
24 December 2002, which are the subject of
this
proceeding, the Commission thinks it is unnecessary to
give further details of the arguments supplied by third
parties on these points.

the interested third parties consider it

(27) As regards the treatment of exceptional and gratuitous
advantages,
is
appropriate not to take account of these advantages in
the cost plus method, since, they are not costs; they are a
marginal component of the coordination centres scheme;
they are a theoretical advantage which, potentially, does
not benefit any centre, and any advantages will be
corrected by the international conventions preventing
double taxation concluded between Belgium and its
principal trading partners.

1. Comment concerning the Belgian authorities’
decision
interpretation

Commission

the

of

(28)

(29)

authorising use of the cost plus method

Belgium wanted to give its interpretation of that part of
the initiating Decision which authorises use of the cost
plus method. The Commission will reply to the Belgian
authorities concerning their interpretation in a letter to
be sent to them shortly.

This Decision is concerned only with the measures about
which the Commission expressed doubts in the initiating
Decision;
it does not, therefore, concern the cost plus
method. The Commission would consequently refer to
the initiating Decision on this point, emphasising that
the authorisation given assumes compliance with the
principles and arrangements described therein.

2. Aid character

(30) A measure constitutes an aid when it cumulatively
satisfies the four criteria set out in Article 87(1) of the
Treaty, namely: 1. the measure must confer on recipients
an advantage which relieves them of charges that are
the advantage
normally borne from their budgets; 2.
must be conferred from state resources; 3.
it must
affect competition and trade between Member States,
and 4. it must be granted selectively or specifically, i.e.
by favouring certain undertakings or the production of
certain goods.

(31) At the end of the formal

investigation procedure, and
taking account of the arguments already developed in
the initiating Decision, the Commission considered that
the doubts expressed at the initiation stage about the
notified measures from the Law of 24 December 2002
had not been removed and that the measures constituted
aid within the meaning of Article 87(1) of the Treaty.
They were advantages (tax exemptions) granted selec-
tively to certain undertakings only (approved coordi-
nation centres or groups owning such a
centre)
through state resources (waiver of
tax resources) and
affecting competition and intra-Community trade (since
certain centres or certain groups to which they belong,
whose business is by definition international, operate or
may operate in sectors which are the subject of trade
between Member States).

(32)

In the meantime, Belgium has undertaken to abolish the
provisions specific to coordination centres and to replace
them with alternative measures which do more than just
amend the notified scheme. The Commission considers
that it is not necessary to justify in detail its assessment
of the measures originally notified. Only the proposed
changes to the scheme are assessed in this Decision.

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Withholding tax and capital duty

The exemptions from withholding tax and capital duty
will be removed from the Law of 24 December 2002
(see recitals (20) and (21) of this Decision) and replaced
by exemption or reduction measures which the Belgian
authorities regard as general. Thus no specific economic
advantage is granted any longer to approved coordi-
nation centres and there is no longer any aid for such
centres within the meaning of Article 87(1) of the Treaty.

Exceptional and gratuitous advantages

The amendment to the Law of 24 December 2002, see
recital (22) of this Decision, will have the effect of taxing
all the exceptional and gratuitous advantages received by
a coordination centre in the same way as they are taxed
when they are received by an undertaking liable to tax
under the ordinary system. Under current ordinary tax
law, this means that all the exceptional and gratuitous
advantages will have to be added to the amount obtained
by the cost plus method. Under these conditions the
Commission considers
economic
advantage is granted any longer to approved coordi-
nation centres as regards the tax treatment of the excep-
tional and gratuitous advantages received. Consequently
there is no longer any aid within the meaning of Article
87(1) of the Treaty.

that no specific

in certain cases,

Belgium has announced that it could, in addition, adopt
new provisions exempting,
income
deriving from exceptional and gratuitous advantages.
The Commission draws Belgium’s attention to the need
to determine the conditions of this exemption in such a
way that it does not specifically favour certain under-
takings or the production of certain goods, and, as
appropriate, to the obligation to notify such measures
if they are likely to constitute aid.

gratuitous advantages received by a coordination centre
in the same way as they are taxed when they are received
by an undertaking liable to tax under
the ordinary
system.

(38)

advantages

These changes will have the effect of abolishing the grant
of
as
compared with other undertakings and hence the grant
of aid to such centres within the meaning of Article 87
of the Treaty,

to coordination centres

specific

HAS ADOPTED THIS DECISION:

Article 1

The measures provided for by Article 29 of
the Law of
24 December 2002 amending the system for companies with
regard to income taxes and instituting a system of advance
decisions on tax matters do not constitute aid under Article
87(1) of the Treaty, subject to Belgium keeping the following
commitments:

(a) abolition of

the exemptions from withholding tax and

capital duty for approved coordination centres;

(b) amendment of

the scheme for approved coordination
centres, so that all the exceptional and gratuitous advantages
received by a coordination centre are taxed in the same way
as when they are received by another undertaking estab-
lished in Belgium and subject to the ordinary tax system.

Article 2

Belgium shall inform the Commission, within two months of
the date of notification of this Decision, of the measures taken
to comply with it.

VII. CONCLUSIONS

Article 3

(33)

(34)

(35)

(36)

Belgium has undertaken to abolish the exemptions from
withholding tax and capital duty provided by Article 29
of
the Law of 24 December 2002 for coordination
centres approved under Royal Decree No 187 and to
replace
reduction
measures which do not favour centres over other under-
takings established in Belgium.

exemption or

them by

general

(37)

Belgium has also undertaken to adapt its legal and/or
administrative rules so as to tax all exceptional and

This Decision is addressed to the Kingdom of Belgium.

Done at Brussels, 8 September 2004.

For the Commission

Mario MONTI

Member of the Commission