Belgium has become the latest EU member state to fall foul of the crackdown on sweetheart tax avoidance incentives.
Following announcements on similar arrangements in Luxembourg and the Netherlands, the European Commission has ruled that the Belgian "excess profit" scheme - which permits substantial tax savings by multinational companies - constitutes illegal state aid.
The Belgian government now has to try to recover €700m from 35 of the 60 companies that have benefited from the scheme.
The excess profit scheme allowed the Belgian part of a company to write off a chunk of taxable income that it could attribute to benefits of multinational status. This could include relative intangibles such as technical expertise, savings from pan-group purchasing and reputational value. The system was scrapped early last year.
However, the Commission ruled that, since such gains did not feature on any balance sheet, they should not be eligible for tax breaks, which could be as high as 90 per cent for some companies.
The latest ruling affects a number of Belgian stalwarts, including ABInBev and Proximus, for a total of €700m over the last decade.
The Commission said that; "Belgium allowed a select group of multinationals significant tax advantages that are in breach of EU rules on state aid. This is a distortion of competition, since smaller companies that are not multinationals do not receive the same conditions."
Global accountancy consultancy PwC had told investors as recently as 2012 that effective corporate tax rates in Belgium could be as low as eight per cent, compared with headline rates of 34 per cent.
European Competition Commissioner Margrethe Vestager said that; "National tax authorities cannot give any company, however large or powerful, an unfair competitive advantage compared to others."
According to the Danish official, the Belgian scheme, "allowed companies to pay substantially less tax, simply because they are multinational and could benefit from alleged synergies."
The Belgian federal finance minister, Johan Van Overveldt, said that he would seek talks with the Commissioner. He added that the Belgian government "'excluded nothing"', including appealing against the ruling, arguing that it would be complex to try to recover the sums from the companies affected.
The ruling follows recent revelations over a number of sweetheart deals offered by Luxembourg and the Netherlands, where companies including Starbucks and Fiat were decreed to have benefited from illegal selective tax advantages.
Announcing the decision, Ms Vestager went out of her way to highlight a common trait of those able to avoid taxes through the Belgian scheme. “Most of the companies benefiting are European; it is also European companies that avoided the majority of the taxes (about €500m of the €700m) under the scheme, which they now have to pay,” she said.