The European Commission today ruled that Belgium's tax scheme, which handed out tax breaks worth around €700m (£522m) to companies, was illegal.
Belgium's tax scheme favoured multinational companies by exempting them from paying tax on so-called excess profits. The Belgian tax authorities could lower the tax base by deducting excess profit for certain companies, on the basis that a multinational would make more than a stand-alone competitor in the same situation.
According to the commission, in practice, it meant that the companies concerned did not pay taxes on more than 50 per cent of their actual profits, and in some cases up to 90 per cent.
Some 35 companies, mainly European, benefited from the scheme, which has been in place since 2005. The Commission, the executive body of the EU, said Belgian would have to recoup €500m of the €700m in unpaid tax from the companies concerned.
The competition commissioner Margrethe Vestager said in statement today:
National tax authorities cannot give any company, however large or powerful, an unfair competitive advantage compared to others. This means that national tax authorities cannot establish tax schemes that only benefit a select group of companies, in this case, multinationals.
Such schemes put smaller competitors at an unfair disadvantage. They are active in the same markets and have to pay their taxes fair and square, according to normal tax laws.
Vestager also announced that later this month it will present proposals to coordinate international tax governance standards in the EU. She said: "It is based on a very simple principle: that companies should pay taxes where they make profits. For successful adoption we call on all Member States to play their part."
Last year Starbucks and Fiat were both forced to pay €30m in unpaid tax each, after the commission ruled The Netherlands and Luxembourg's tax arrangements were illegal.
The commission did not name the companies affected in Belgium, Belgian mega-brewer Anheuser-Busch InBev has been named in reports, along with British American Tobacco.