After years of legal battles, Finnish energy group Fortum has won its case against the Belgian Special Tax Inspectorate regarding a corporate structure opened in Belgium, newspaper L’Écho reports.
As a result, the Belgian treasury, and thereby the taxpayer, will foot the bill of over €100 million. The tax inspectorate will not contest the decision.
The legal battle revolves around Fortum EIF NV, a corporate structure set up in 2008 which, according to Fortum, “granted internal financing to a Swedish group company for an acquisition in Russia.” As the company provided loans to other subsidiaries around the world, the Belgian entity benefited from Belgian tax advantages, including a deduction for risk capital.
Fortum used the Belgian company as a vehicle to complete an acquisition valued at €4 billion, applying the notional interest deduction on all the profits made through the Belgian structure. The Federal Government did not take kindly to what it viewed as a Belgian shell company, established without any financial or economic relevance within the country.
"According to the decision of the Court of Appeal, Fortum EIF NV was established in order to manage business-related financing risks. The tax authority disagreed with the decision and appealed to the Supreme Court (Hof van Cassatie) in March 2016," Fortum explained in a press release.
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In 2011, the Belgian tax inspectorate demanded taxation adjustments for 2008-2013, amounting to more than €113 million. A decision which Fortum later challenged in June 2020 before the Antwerp courts.
In a statement published by the company following the first ruling in favour of Fortum, the Finnish energy group argued that Belgian tax authority's interpretation of the law had been “inconsistent with the local regulation.”
The cancellation of the tax adjustments for 2010-2013 will allow Fortum to recover €104.2 million in undue taxes and default interest. Ultimately, it will be the taxpayer that partly foots this bill, as the Belgian treasury will be legally obliged to reimburse the Finnish energy company with public funds.