EU Orders Belgium to Recover Unpaid Taxes From 35 Firms

BRUSSELS—About 35 multinationals, including brewer Anheuser-Busch InBev NV, will be required to pay roughly €700 million ($765 million) in additional taxes in Belgium after European Union regulators ruled they had benefited from an illegal tax break.

After an 11-month investigation, the European Commission, the bloc's top antitrust regulator, concluded Monday that a Belgian tax-discount plan for multinationals amounted to "a very serious distortion of competition within the EU's single market," and ordered Belgium to recover the unpaid taxes.

Other companies facing back-tax demands as a result of the decision include BP PLC, German chemicals giant BASF SE and Pfizer Inc., a person familiar with the case said.

The tax bill dwarfs an earlier ruling against Starbucks Corp. and Fiat Chrysler Automobiles in October, setting an ominous new benchmark in an expanding inquiry into tax deals that has ensnared major U.S. multinationals including Apple Inc. and Amazon.com Inc.

It comes at a sensitive time for Belgium-based AB InBev, which is in the middle of a complicated $108 billion deal to buy the world's second-largest brewer, SAB Miller PLC of London.

Belgian Finance Minister Johan Van Overtveldt warned that the EU's decision, if implemented, would have considerable consequences for the companies concerned, and that the reimbursement itself would be complex.

The tax scheme, in place since 2005, allowed certain corporations to reduce their tax base by between 50% and 90% to discount for so-called excess profits that allegedly result from being part of a multinational group, the commission said.

At a news conference, EU antitrust chief Margethe Vestager said the scheme had given "carte blanche to double non-taxation" of certain multinationals in Belgium. Ms. Vestager declined to name the companies affected, but she stressed that they were primarily European, seeking to deflect criticism that she has focused too much of her firepower on U.S. multinationals.

A person familiar with the matter said the largest beneficiaries of the Belgian scheme—and therefore those likely to face the biggest back-tax bills—were AB InBev, Swedish industrial company Atlas Copco, BP, BASF, Belgian telecommuications operator Belgacom, now known as Proximus Group, French retailer Celio and vehicle-component manufacturer Wabco.

AB InBev confirmed in a statement that it benefits from the type of Belgian tax ruling deemed illegal by Brussels. It said it was disappointed by the EU's decision and was confident that it had always complied with "Belgian and international tax provisions."

"We will consider our options, taking into account the reactions by the Belgian authorities," the company said—leaving the door open to an appeal with the EU's top courts in Luxembourg.

BASF said it was closely following the case, adding it was one of the largest taxpayers in Belgium. Atlas Copco declined to comment, citing a "quiet period" before its results later this month. A spokesman for Wabco said the company was reviewing the EU's announcement and would "issue its own statement in due course." BP declined to comment.

Other companies involved didn't respond to requests for comment.

Tax experts warned that the EU's decision would create uncertainty for corporate directors, and risked driving investment away from Belgium.

"The reputation of Belgium as an investment location will certainly be damaged as trust and legal certainty is key," said Dirk Van Stappen, a tax partner at KPMG in Belgium and professor at the University of Antwerp.

Mr. Van Overtveldt said Belgian authorities would hold further negotiations with EU regulators, and didn't rule out lodging an appeal with the bloc's top courts in Luxembourg, depending on the outcome of those talks.

Geert De Neef, a Brussels-based partner with international tax consultancy Taxand, said multinationals might consider moving their headquarters to London, the Netherlands or Luxembourg, where headline corporate tax rates are lower than Belgium's 34%. "Then you don't need special tricks, you know it is acceptable for the European Commission," Mr. De Neef said.

The EU's widening tax inquiry has also drawn criticism from the U.S. government over its apparent disproportionate targeting of American companies, which have been targeted with four separate probes.

Responding directly to such criticism on Monday, Ms. Vestager said the latest ruling would affect mainly European multinationals. Of the €700 million in back taxes to be repaid, €500 million would come from European companies, she said.

"I, of course, hear the criticism that this is about U.S. companies, which it is obviously not," Ms. Vestager said. "What we are interested in is fair competition."

The multinationals that benefited are from a variety of sectors, but are generally involved in producing goods, Ms. Vestager said.

The tax probes are a top political priority for European policy makers, who are under pressure to show that the biggest companies are paying their fair share during an age of austerity. But tax experts complain that the inquiry might have repercussions for investment in Europe because it risks overturning thousands of long-established corporate tax structures.

EU regulators have so far closed two probes, into Starbucks's tax affairs in the Netherlands and Fiat Chrysler Automobiles NV's in Luxembourg. The EU ruled in October that both companies had benefited from illegal tax deals and ordered the governments to reclaim between €20 million and €30 million from each company.

Both decisions are expected to be appealed at the EU's courts in Luxembourg, a process that can take years. The governments involved in the investigation have denied giving special treatment, and the companies have denied receiving it.

Write to Tom Fairless at [e-mail]

(END) Dow Jones Newswires

January 11, 2016 13:25 ET (18:25 GMT)

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