Executive summary

On 24 September 2026, the Belgian Constitutional Court (Court) issued a procedural decision (judgment no. 107/2026) that keeps open the route by which the Court of Justice of the European Union (CJEU) may assess whether Articles 12 to 14 of Council Directive (EU) 2022/2523 (the Pillar Two Directive) comply with the Charter of Fundamental Rights of the European Union (the Charter), the fundamental freedoms and the general principles of EU law. In the new decision, the Court confirms that CJEU Case C-519/25, an action challenging the Belgian undertaxed profits rule(UTPR) may proceed.

The Court held that measures the Belgian legislature has taken, or may yet take, following the European Commission's 12 January 2026 notice on the Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework agreement on safe harbors do not affect the continued existence of the dispute before the CJEU. The Court also declined the applicant's request to invite the CJEU to give the case priority.

As the Court's decision is procedural, it does not decide whether the UTPR is compatible with EU law. Because the UTPR is the backstop that gives the global minimum tax its reach over profits that are not subject to a qualified domestic minimum top-up tax (QDMTT) or an income inclusion rule (IIR), the outcome of the CJEU's review in Case C-519/25 will affect every Member State that has transposed the Directive.

Background

The Pillar Two Directive requires Member States to implement a coordinated set of charging mechanisms designed to bring the effective tax rate (ETR) of in-scope multinational enterprise (MNE) groups to 15% in each jurisdiction in which they operate. Belgium transposed the Directive through the Law of 19 December 2023, which provides for a QDMTT and an IIR, applicable to fiscal years beginning on or after 31 December 2023, and for a UTPR, applicable to fiscal years beginning on or after 31 December 2024. (For background, see EY Global Tax Alert, Belgian parliament approves draft bill on Pillar Two, dated 19 December 2023.)

The UTPR is intended to operate as a backstop. If a constituent entity's low-taxed profits are not subject to a QDMTT in the source jurisdiction or an IIR at the parent-entity level that captures the full amount of top-up tax, the right to impose the residual top-up tax is allocated among other jurisdictions in which the MNE group has constituent entities, using a formula based on employees and tangible assets. A Belgian constituent entity could therefore become liable for top-up tax with respect to profits realized by entities in its MNE group that it does not own or control, and the amount allocated to the Belgian constituent entity is not limited by its own profits or taxable income.

On 27 June 2024, the American Free Enterprise Chamber of Commerce asked the Court to annul the UTPR provisions in the Law of 19 December 2023. It argued that taxing a Belgian entity based on the profits of foreign group entities, regardless of its own ability to pay, breaches key EU legal principles and rights.

Because the contested provisions implement a mandatory EU rule, the Court asked the CJEU (in Case C-519/25) whether Articles 12 to 14 of the Directive breach the Charter, the EU fundamental freedoms, legal certainty and fiscal territoriality by imposing UTPR top-up tax regardless of an entity's financial capacity.

On 5 January 2026, the OECD/G20 Inclusive Framework agreed on a package that included a simplified ETR safe harbor, an extended transitional country-by-country reporting (CbCR) safe harbor, a substance-based tax incentive (SBTI) safe harbor, and a side-by-side system consisting of a side-by-side safe harbor and an ultimate parent entity (UPE) safe harbor. On 12 January 2026, the European Commission published notice C/2026/253, confirming that the agreement qualifies under Article 32 of the Pillar Two Directive. This allows Member States to treat the top-up tax for a jurisdiction as zero when the conditions of a qualifying international safe harbor are met. (For background, see EY Global Tax Alert, OECD releases Side-by-Side Package on Pillar Two Global Minimum Tax: Detailed review, dated 16 January 2026.)

On 17 April 2026, the CJEU asked whether these developments meant that Belgian case C-519/25 was no longer relevant. The Court reopened the case on 12 May 2026 and invited the parties to submit further arguments by 15 June 2026. In decision no. 107/2026, the Court confirmed that the case should continue.

Belgian Constitutional Court case

The question before the Court

The Belgian State argued that the side-by-side system had made the CJEU case moot. They asserted that the side-by-side safe harbor switches off the IIR and the UTPR for groups whose UPE is located in a jurisdiction with a qualified side-by-side regime. The OECD central record lists the United States (US) as such a jurisdiction, and the applicant represents US business interests. Because the OECD/G20 Inclusive Framework side-by-side package and the European Commission notice are expected to eliminate or significantly reduce UTPR exposure for many US MNE groups, the Belgian authorities argued that the applicant would no longer be affected by the Belgian UTPR provisions and thus would no longer have the legally required interest to challenge those provisions in court.

The Court had to decide whether the applicant continues to have the required interest. Under Belgian constitutional procedure, an applicant must show that the contested provision is capable of affecting it directly and adversely. If the interest lapses in the course of a proceeding, the action becomes inadmissible and the reference to the CJEU loses its object.

Why the Court found that interest persists

The Court concluded that the interest has not lapsed, on the following two grounds:

1. The side-by-side measures agreed upon in January 2026 have not yet been transposed into Belgian law, so the UTPR as enacted in Sections 35 and 36 of the Belgian Pillar Two law continues to apply in its unmodified form.
2. Even taking the January agreement into account, certain Belgian subsidiaries of US-MNE groups may fail to qualify for a safe harbor with respect to the UTPR, whether under the side-by-side safe harbor or, subject to its conditions, under the transitional UTPR safe harbor.

According to the Court, the contested provisions therefore could potentially affect the entities the applicant represents. The Court concluded that the measures taken or still to be taken by the Belgian authorities following Commission notice C/2026/253 have no bearing on the continued existence of the dispute pending before the CJEU.

No priority treatment before the CJEU

The Court declined to ask the CJEU to prioritize the case. The case will follow the normal procedures.

What the Court's decision does not decide

The Court's decision does not address whether the UTPR is valid under EU law. The Court confirmed that only the CJEU can decide whether the Pillar Two Directive complies with the Charter, the fundamental freedoms and the general principles of EU law. The decision also does not change the Belgian Pillar Two rules: the QDMTT, IIR and UTPR remain in force, as do the related registration, notification, filing and advance payment obligations.

Implications

In response to an inquiry from the CJEU, the Court concluded that, notwithstanding the side-by-side agreement and EU notice, the applicant continues to have the legally-required interest to pursue its challenge to the Belgian UTPR. Based on this procedural decision, the pending case in the CJEU will continue.

For MNE groups with Belgian constituent entities, three practical consequences follow:

1. Compliance requirements continue unchanged, as the requirements for Pillar Two registrations, the Global Anti-Base Erosion (GloBE) Information Return, the QDMTT, IIR and UTPR returns and the associated advance payments are unaffected by the Court's decision.
2. MNE groups with a UPE that is not located in a jurisdiction with a qualified side-by-side or UPE regime should map residual UTPR exposure.
3. MNE groups relying on the transitional UTPR safe harbor should verify that its conditions are met for relevant fiscal years.

Until the side-by-side and UPE safe harbors are implemented in Belgian law, the current UTPR rules remain fully applicable. MNE groups planning to use these safe harbors beginning with fiscal year 2026 should therefore closely monitor the Belgian legislative process, as the timing and scope of implementation will determine when relief becomes available.

The CJEU must still decide whether the UTPR is a breach of the Charter, the fundamental freedoms and other EU law principles, and what the consequences would be if it is found to be a breach. MNE groups paying top-up tax under the UTPR while the case is pending should consider, together with their advisers, what protective action may be needed. They should also review their provisions, effective tax rate forecasts and disclosures, as a ruling in the CJEU is not expected in the near term.