Global Tax Adviser, October 27, 2015. The EU Commission officially announced its decisions on its State aid investigations into transfer pricing rulings granted to Fiat Finance and Starbucks, and concluded that the two companies were granted selective tax advantages by Luxembourg and the Netherlands, respectively. These actions were found to be in contravention of EU state aid rules. As a result, the EU Commission has ordered Luxembourg and the Netherlands to recover the unpaid tax of twenty to thirty million euros (approximately $29 million to $44 million), with interest, from each of Fiat Finance and Starbucks, respectively.
These decisions form part of the standard state aid investigation procedure. It is now open to the Member States or the companies in question to appeal the decisions before the Court of Justice of the European Union. The Dutch and Luxembourg governments have indicated that they will consider the decision carefully. Final decisions on other investigations involving Apple and Amazon are still pending.
State aid can occur whenever a state provides assistance that gives certain organizations an advantage over others. In the tax context, state aid could apply to any measure intended to exempt certain taxpayers from the normal application of the general taxation system without there being any justification for the exemption based on the nature of the system.
In the EU, many countries provide taxpayers with rulings that lay out the implications of the transactions they are undertaking in order to provide clarity on how their corporate tax will be calculated, or whether special tax provisions could apply. The EU Commission has accepted in the past, and has reconfirmed in its current investigation, that tax rulings, in and of themselves, are not problematic and should not generally constitute state aid.
Tax rulings could be considered to be state aid if they are used to provide selective advantages to a specific company or group of companies. In the cases of Fiat Finance and Starbucks, the decisions found that the transfer pricing rulings that were granted to the two companies gave them a selective and unfair advantage.
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Information is current to October 27, 2015. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500.