The European Commission (EC) has launched an investigation into Belgium's system of support for innovative companies, seeking in particular to determine whether the country awarded tax breaks to young innovative companies for seven years before it transposed the relevant EU directive from 2006 into national law.

Based on the results of a screening exercise it started in 2011, the Commission suggested that some companies may have been exempted from paying payroll taxes on remuneration of scientific R&D staff without the required legal framework. This may have given the companies an unjustified competitive advantage, it said, adding that Belgium has not provided sufficient information to dispel doubts.

The EC said Belgian authorities also "failed to notify the Commission when they tacitly renewed the scheme after its expiry in July 2011 and increased the level of tax relief."

To qualify as a young innovative company under the EU scheme, a company must be small, have existed for less than 10 years and spend 15% of its total costs on R&D.