First assessment notices for windfall tax on electricity generators issued

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During the first 15 working days of October 2023, the Belgian federal public service for the economy (“FPS Economy”) delivered the first assessment notices to companies that fall within the scope of the temporary windfall tax on electricity producers that applies for the periods 1 August 2022 through 31 December 2022 and 1 January 2023 through 30 June 2023. The Belgian energy sector has already raised questions over the implementation of the tax in Belgium, and about its calculation by the Commission for the Regulation of Electricity and Gas (CREG) and the FPS Economy.

Background

Following the adoption of an EU regulation in October 2022 imposing a levy on deemed excess profits from electricity generation activities, Belgium implemented corresponding national measures through the Law of 16 December 2022 (Dutch I French). As a result, electricity producers with an energy facility capacity of at least one megawatt are subject to a 100% tax on any income from the sale and supply of electricity over and above a set cap. In general, this cap is EUR 130 per megawatt hour (MWh), but in certain cases the cap may increase to a maximum of EUR 180 per MWh. 

It is important to note that the windfall tax applies not only to traditional companies with core activities involving electricity production, e.g., operators of nuclear power plants, but also to a much broader group of companies generating electricity from a range of energy sources, such as biogas, wind turbines, and solar panels.

Assessment for the first taxable period

The assessment notices received in October 2023 only relate to the first taxable period, i.e., 1 August 2022 through 31 December 2022. The assessment notices relating to the second period will be issued to the relevant companies no later than January 2024.

In practice, some of the proposed tax calculations issued by the CREG and the FPS Economy have been found to contain calculation errors, and the legal interpretation of the relevant legislation may be open to challenge (e.g., the deduction of costs for the purchase of electricity).

The implementation of the windfall tax in Belgium, together with possible irregularities in the assessments, could have a severe impact on the cash position or, in extreme cases, even the business continuity of companies within the Belgian energy sector. The compatibility of the legal framework of the windfall tax with the Belgian constitution is debatable, owing in part to its retroactive effect.

Solutions

The two following methods may be used to raise a dispute over a windfall tax assessment received:

• A so-called informal administrative appeal may be lodged with the FPS Economy, stating that the proposed assessment is incorrect; however, such an administrative appeal is neither legally regulated nor mandatory.
• The only formal method of recourse against the tax assessment is to bring an action before the Court of First Instance in Brussels, allowing companies to address all their concerns over the windfall tax. Some of the tax’s fundamental principles (such as the ban on retroactivity) already seem to present challenges which may be expected to result in legal proceedings. 

The law specifies a five-year period for taxpayers to contest the windfall tax. However, in principle, recovery measures may be initiated as soon as the payment period expires in January 2024.

Deloitte Legal’s tax dispute resolution team has extensive practical experience in tax proceedings and can assist taxpayers with any legal action they wish to pursue in this context.