A Belgian tax break for multinational firms is in breach of EU law, the bloc's executive found Monday, ordering Brussels to recoup around 700 million euros (764.5 million dollars) in unpaid taxes from at least 35 companies.
The European Commission is probing several countries in relation to special tax benefits offered to corporations. The investigations, which focus on whether these benefits comply with EU competition laws, come amid a wider global crackdown on corporate tax avoidance.
The Belgian investigation focused on a scheme allowing corporations to reduce their tax liability by deducting "excess profits" - accrued as a result of belonging to a multinational group - from their taxable profits.
The companies enrolled in the scheme were able to reduce the amount of profit recorded for tax purposes by at least 50 per cent. In some cases that figure reached up to 90 per cent, the commission found.
Belgian firms and stand-alone companies were not able to benefit from the scheme, marketed under the logo "Only in Belgium."
"Belgium has given a select number of multinationals substantial tax advantages that break EU state aid rules," the bloc's competition commissioner, Margrethe Vestager, said in a statement.
"It distorts competition ... by putting smaller competitors who are not multinational on an unequal footing," she added.
The Belgian authorities had argued that the scheme helped to avoid double taxation - in which companies are taxed twice on the same profits. But since firms were not required to demonstrate any evidence or risk of this, the scheme amounted to "double non-taxation," Vestager argued.
Most of the multinationals benefiting from the scheme are based in Europe, the commission said. It has not named them, noting that it only investigated the scheme, not the individual companies.
Under EU law, these firms must now be asked to settle around 700 million euros in unpaid taxes dating back to 2005, when the scheme was introduced.
Belgium stopped signing companies up to the scheme in February, when the commission launched its investigations. However, those firms already benefiting from the system have continued to do so, the EU's competition watchdog said.
Taxation is usually a national issue in the 28-country EU, but the commission has intervened in cases where member states have set up special tax regimes for companies. The commission says such treatment amounts to state aid - an area it regulates.
The commission has already used this approach to crack down on tax rulings offered by the Netherlands to US coffee retailer Starbucks and by Luxembourg to the financing arm of Italian carmaker Fiat.
The two companies should repay between 20 million and 30 million euros in illegal tax advantages, the commission found.
It has also launched investigations into individual tax rulings granted by Ireland to US technology giant Apple, as well as by Luxembourg to US online retailer Amazon and fast food giant McDonalds.
Decisions on these cases will be taken "if and when they are ready," Vestager said Monday.