On 1 March 2018, The Constitutional Court of Belgium announced the fairness tax unconstitutional, thus nullifying it (judgment n° 24/2018). According to the Court’s ruling, however, the fairness tax is maintained until financial year 2017 (tax year 2018).

Before deciding on the merits of the case, the Constitutional Court referred a preliminary question to the Court of Justice of the European Union.  In its judgment of May 17, 2017, (Case C-68/15), the Court held that the Fairness Tax is inconsistent with the Parent-Subsidiary Directive to the extent that it applies to redistributed dividends that qualify under the Parent-Subsidiary Directive with the effect that  the 5% ceiling, as provided for by article 4(3) of that directive, is crossed.

As a consequence, in its judgment of March 1, the Constitutional Court struck down the Fairness Tax. For the determination of the Fairness Tax, dividends are taken into account that a company receives and subsequently redistributes, as a result of which the 5% ceiling is exceeded.

The Fairness Tax is annulled with effect as from tax year 2019 (financial year 2018), and from its introduction, to the extent it violates the Parent-Subsidiary Directive.

In the meantime, the Belgian legislature adopted other measures to limit the benefits of carried-forward of tax losses and the NID as from tax year 2019 (financial year 2018).

The use of certain tax assets –  including carried forward tax losses and the NID – is now limited for any taxable year to EUR 1 million plus 70% of the taxable income above 1 million, leading to “minimum taxation” of the remaining 30%. The tax assets that cannot be used are carried forward to the next tax year.