Member News, News

Tax rulings and state aid – saving on tax may prove to be expensive

The European Commission has commenced investigations into so called ‘tax rulings’ issued by several Member States. These rulings include comfort letters issued by (national) tax authorities giving a specific company clarity on how its corporate tax will be calculated or on the use of special tax provisions applicable to their specific situation. In general, tax rulings may involve state aid within the meaning of EU rules if they are used to provide selective advantages to a specific company or group of companies.

The Commission opened investigations into tax rulings granted by the tax authorities of Luxembourg, Ireland and The Netherlands in favour of FIAT and Amazon, Apple and Starbucks respectively. The four specific tax rulings focus on transfer pricing arrangements. Transfer pricing refers to the prices set for transactions between various parts of the same corporate group, in particular prices set for goods sold or services provided by one subsidiary of a corporate group to another subsidiary of that same group. The cases concern:

– The individual rulings issued by the Irish tax authorities on the calculation of the taxable profit allocated to the Irish companies Apple Operations Europe and Apple Sales International;

– The individual ruling issued by the Dutch tax authorities on the calculation of the taxable basis in the Netherlands for manufacturing activities of Starbucks Manufacturing EMEA BV;

– The rulings issued by the Luxembourg tax authorities on the calculation of the taxable basis in Luxembourg for the financing activities of FIAT Finance and Trade Ltd and the tax deductible royalty of Amazon EU Sàrl.

The Commission’s preliminary view of the abovementioned cases is that the tax rulings may constitute state aid in breach of EU rules as they give the respective undertakings an unfair advantage. The Commission has opened formal in-depth investigations which means Member States will enter into a dialogue with the Commission on the potential breaches of EU state aid rules. The investigation can be closed with a formal decision by the Commission which could possibly, oblige the Member States to require repayment by the companies of the tax savings involved.

Press release on state aid for Apple, Starbucks and FFT, click here.
Press release on state aid for Amazon, click here.
Alleged aid to FFT, click here.
Alleged aid to Apple, click here.
Alleged aid to Starbucks, click here.

Key Contacts for this subject:
Parret, Laura,  Counsel, +3225079812 |
Havenga, Rob,
Tax Partner, +31206056537 |
Dikmans, Sylvia,
Tax Partner, +31206056933 |
This is brought to you by EACCNY member Houthoff Buruma