On 12 May 2012, the Court of First Instance (Gerecht van Eerste Aanleg) Leuven gave its decision in a case on the deduction of competition fines as business costs. Details of the case are summarized below.

(a) Facts. The Taxpayer was a company established in Belgium, which claimed a deduction for a fine imposed by the European Commission due to violation of EC competition law. The tax administration refused to grant the deduction.

(b) Issue. Article 53(6) of the Belgian Income Tax Code (ITC), amongst others, provides for the non-deductibility as business costs of fines and penalties of all kind.

(c) Decision. The Court of First Instance first observed that "penalties of all kind" are not deductible. The Court decides that this term includes both criminal as well as administrative fines. The Court held that the disparate treatment between administrative fines (deductible) and criminal fines (non-deductible) is unjustified.

Furthermore, the Court noted that the non-deductibility of both criminal penalties and administrative fines prevents an infringement of the equality principle.

Finally, the Court held that even if a competition fine would not be covered by the non-deductibility provision concerned, the fine will still not be deductible. The Court noted that it does not constitute a business cost. Instead, it is the result of behaviour not (normally) associated with the carrying on of a business.

Consequently, the Court decided that fine imposed by Commission due to violation of EC competition law is not deductible.

Note: It may be noted that on 20 December 2011, the Court of First Instance Brussels (Hof van Eerste Aanleg Brussel) requested a preliminary ruling from the Belgian Constitutional Court in NV Tessenderlo Chemie v. Belgian State (Case No. 5285) on the constitutionality of the non-deductibility of criminal penalties.

Furthermore, it may be mentioned the Belgian Court takes the same view as the Dutch Supreme Court which on 12 August 2011 also held that a fine imposed by the European Commission due to violation of EC competition law is not deductible. Only the reasoning of the Dutch Supreme Court is different because it held that the entire fine constitutes a non-deductible administrative penalty.