Constitutional court: fairness tax nullified as of assessment year 2019

On 1 March 2018, subsequent its preliminary ruling request of 13 February 2015 and the decision of the Court of Justice of the European Union (ECJ) of 17 May 2017 in X v. Ministerraad (Case C-68/15), the Belgian Constitutional Court nullified the fairness tax (2018-024n).

The fairness tax is a separate tax of 5,15% on distributed profits which have not been effectively taxed as a result of the notional interest deduction and/or tax losses carried forward. According to the ECJ, the fairness tax violates article 4 of the Parent-Subsidiary Directive to the extent a resident company redistributes dividends in a taxable period following the taxable period in which it received these dividends.

In view of this violation, the Court decided that the fairness tax violates the articles 10, 11 and 172 of the Belgian Constitution, guaranteeing equality and non-discrimination. Since the calculation of the fairness tax becomes unworkable in view of this violation, the Court decided to nullify the fairness tax entirely. The annulment is binding from the moment the decision of the Court is published in the Belgian Official Journal and should have, as a rule, a retroactive effect.

However, for budgetary reasons, the Court decided to moderate the retroactive effect in this particular case. For assessment years 2014-2018, the effects of the annulled act are maintained as far as it does not concern the situation of a Belgian company redistributing a dividend since this was considered incompatible with the Parent-Subsidiary Directive.

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