The European Commission (EC) is focusing on state aid in the area of tax rulings and in respect of undertakings operating in more than one country.
For a tax regime to be considered “state aid,” the benefit or advantage must be selective—in that it favors certain economic operators and/or certain products. A tax ruling in relation to intra-group pricing that deviates from the arm’s length principle could potentially be classified as unlawful state aid.
For example, the EC has launched investigations into certain taxpayers, and has written to all EU Member States asking them to provide details of all advance pricing agreements (APAs) and other rulings issued since January 2010.
If the EC finds unlawful state aid is involved in a tax ruling, it will order that that ruling be cancelled and further order recovery from the taxpayer of the amount of the unpaid tax with compound interest for a period of up to 10 years.