14 March 2025 Henk Vanhulle  -  Caroline Borgers  -  Matthieu Possoz  -  Sören Vandeweyer  -  Abdelmajid Roughou Tax

CJEU holds that the Belgian group contribution regime violates the EU Parent-Subsidiary Directive

On Thursday 13 March 2025, Linklaters Tax obtained a long awaited judgement from the Court of Justice of the European Union (“CJEU”) confirming that the Belgian group contribution regime violates the Parent-Subsidiary Directive. 

1. The issue

Since 2019, Belgian tax law provides for a group contribution regime allowing Belgian companies within the same group (under certain conditions) to transfer taxable profits amongst them, i.e. a profitable company can transfer (part of) its taxable profits to a related loss-making company. The latter loss-making company can then offset these transferred profits with its current-year losses.

The interaction between this group contribution regime and the Belgian implementation of the EU Parent-Subsidiary Directive (“PSD”) gives rise to adverse tax consequences.

Indeed, according to the Belgian implementation of the PSD, qualifying dividends are included in the taxable basis and subsequently fully deducted (the “dividend received deduction”, or “DRD”). Such a system results – for companies which suffer operational losses and receive eligible dividends – in a (partial) conversion of their tax losses into another tax asset, being the DRD. 

Under Belgian tax law, the current-year DRD (contrary to the current-year tax losses) cannot be offset against any group contribution received, which means in practice that if a company is in a loss-making position, but has received eligible dividends, the group contribution regime would de facto not apply up to an amount corresponding to these eligible dividends.

We have pleaded before the CJEU that such a limitation on the application of the DRD was contrary to the PSD.

2. CJEU confirms the violation of the Parent-Subsidiary Directive

In a decision dd. 13 March 2025, the CJEU has followed our interpretation by confirming that the Belgian DRD regime violates the PSD by preventing DRD to be offset by intra-group contributions received..

3. Practical implications

Numerous Belgian groups have been affected by this limitation of the DRD regime.

A distinction has to be made between taxpayers which are in an ongoing dispute on that matter with the Belgian Tax Administration, and taxpayers which have not yet invoked the right to offset DRD against the group contribution received:

  • taxpayers which are in dispute with the Belgian Tax Administration might expect a positive outcome of their dispute, based on the aforementioned decision of the CJEU; and
  • taxpayers that have yet to lodge a claim may still do so if the relevant years are not time-barred (taking into account, as the case might be, the five-years limitation provided for by the “ex officio tax relief” procedure).

We would be very happy to verify under which circumstances a claim can be raised for the past. 

Please finally note that we have been informed that the Belgian government is currently discussing a draft law (to be adopted by the end of July) which would solve this issue as from assessment year 2025.