Belgium Allows Pillar Two Challenge to Proceed to European Court of Justice

The Belgian Constitutional Court ruled in Judgment No. 107/2026 issued on September 24, 2026, to allow the challenge against the undertaxed profits rule in Belgium to proceed to the European Court of Justice in Case C-519/25, opening the door for a European judicial review of a key pillar of the global minimum tax agreement.

The ruling did not decide the validity of the rule itself; rather, it is a procedural decision addressing the argument that the applicant's interest had lapsed. The Belgian State had argued that the case was moot because the January 2026 "Side Package" suspends the application of the two rules for groups whose parent entity is located in a qualifying jurisdiction, and because the OECD Central Register lists the United States among these jurisdictions.

The Court rejected this argument for two reasons: that the Side Package measures have not yet been transposed into Belgian law, leaving Articles 35 and 36 of the Pillar Two Law in force without amendment, and that certain Belgian subsidiaries of US-parented groups might not satisfy the safe harbor conditions. The Court of Justice will examine whether Articles 12 through 14 of the Pillar Two Directive conform to the Charter of Fundamental Rights, fundamental EU freedoms, and the principle of legal certainty.

This concerns multinational groups operating in Europe and their tax advisors, as the rule imposes a top-up tax on low-taxed profits within the group regardless of the entity's financial capacity. Belgian Pillar Two compliance obligations remain unchanged, as the ruling did not affect the validity of the rule, and the Court rejected a request to expedite the proceedings before the Court of Justice.

What do these terms mean?

Pillar Two: An international framework imposing a top-up tax on profits of large corporations of at least 15% in every jurisdiction in which they operate.

Undertaxed Profits Rule: A rule allowing a country to impose top-up tax on constituent entities of a multinational group in other low-tax jurisdictions.

Safe Harbor: An exception allowing a jurisdiction to be excluded from the top-up tax calculation when certain conditions are met.

European Court of Justice: The supreme judicial authority of the European Union, which rules on the interpretation of EU law and its consistency with treaties.