ECJ Rules on Compatibility of Belgian Participation Exemption Regime with EC Parent-Subsidiary Directive

Abstract: This article deals with two judgments the European Court of Justice (ECJ) recently issued regarding the conformity of the Belgian participation exemption with the EC Parent-Subsidiary Directive. The case Belgian State v. Les Vergers du Vieux Tauves SA of 22 December 2008 clarifies the personal scope of application of the Directive. A usufructuary cannot be deemed to have a holding in the capital since from a civil law perspective it derives its right to receive profit distribution from its usufructuary rights and not from a holding in the capital. In the Belgische Staat v. NV Cobelfret case of 12 February 2009, the ECJ again rules that a Member State cannot apply unilateral conditions not provided for in the Directive. This case concerns the condition under Belgian domestic law according to which a parent company must have a positive taxable basis in order to benefit from the participation exemption.