In addition to nuclear power plant operators, the windfall tax applies to any natural or legal person who injects electricity into certain electricity grids or onto a direct electricity line. The Belgian government has decided to apply the tax retroactively to all injections of electricity between 1 August 2022 and 30 June 2023, which goes beyond what is stipulated by the European regulation.

It is important to note that the windfall tax applies not only to traditional companies whose core activity is energy production, but also to a much broader group of companies generating electricity from a range of energy sources (e.g., wind energy, solar energy, geothermal energy).

The Law of 16 December 2022 stipulates that the levy only applies when the energy facility is located in Belgium. Revenue from facilities with a capacity of less than one megawatt does not fall within scope of the windfall tax.

The taxable base for the windfall tax is the “surplus revenues,” defined as the positive difference between (i) the market revenues and (ii) the cap on those market revenues, per transaction and per facility.

Cap on market revenues

The cap on market revenues is in principle EUR 130 per megawatt hour (MWh) of electricity, but may increase to EUR 180 per MWh in certain cases. If the facility benefits from a variable support mechanism, the cap will be equal to the “levelized cost of electricity” (LCOE) plus EUR 50 per MWh, with a minimum of EUR 130 per MWh and a maximum of EUR 180 per MWh.

Market revenues

The market revenues are the revenues from the sale and supply of electricity between 1 August 2022 and 30 June 2023, regardless of the date on which the sales contract was concluded and regardless of the market (e.g., intraday market, day-ahead market, bilateral contracts). 

If an electricity generator consumes part of its electricity production for its own use, this own use should in principle not be taken into account for the calculation of market revenues. In addition, subsidies granted by government bodies are not part of market revenues.

To determine market revenues, the Belgian legislator has set out a number of assumptions covering each type of electricity production. These assumptions cover, among others, the market revenues of nuclear power plants, electricity production sold via power purchase agreements (PPAs), and production facilities benefiting from various types of production support mechanism.

The surplus revenues are taxed at a rate of 100%. The Law of 16 December 2022 stipulates that producers may not pass on the tax, directly or indirectly, to other companies or final consumers.

The windfall tax is a levy entirely separate from corporate income tax and is fully tax deductible for corporate income tax purposes.

Under the windfall tax, taxpayers must complete and submit a return to the Belgian Commission for the Regulation of Electricity and Gas (CREG). Based on this return, the CREG will prepare a levy proposal, which will then be forwarded to the Federal Public Service Economy. The template for the return has not yet been published by the CREG but is expected before the end of February 2023.

Taxpayers must submit a return for the period 1 August 2022 to 31 December 2022 to the CREG by 30 April 2023. A return for the period 1 January 2023 to 30 June 2023 must be submitted by 7 September 2023. 

If the taxpayer fails to file a return or if the return is incomplete or late, the CREG may propose to determine the tax on an "ex officio" basis in accordance with which the tax will be calculated on the assumption that the injected electricity was sold at the day-ahead price.

The compatibility of the legal framework of the windfall tax with the Belgian constitution is debatable, owing in part to its retroactive effect. Anyone affected by the windfall tax may institute annulment procedures before the Belgian Constitutional Court within six months after the publication of the law introducing the tax (i.e., by 22 June 2023) and cases challenging the constitutionality of the tax are expected.

An annulment by the Constitutional Court would result in the possibility for individual taxpayers also to challenge the imposition of the tax in their own specific circumstances, by submitting a claim to the competent tax court within six months after the publication of the annulment. In practice, it may also be necessary to dispute the tax on different grounds, e.g., the method of calculation of the tax. At present, no coordinated legal action is foreseen and taxpayers are advised to proceed with caution and to take all possible procedural steps to safeguard their rights.

Deloitte Legal’s tax dispute resolution team in Belgium has all the required experience in comparable cases and would be pleased to assist.