EU Releases Clarifications on State Aid | KPMG | CA

EU Releases Clarifications on State Aid

EU Releases Clarifications on State Aid

Global Tax Adviser, May 31, 2016. The EU Commission has published guidance to clarify the concept of state aid under EU law. The guidance, titled Commission Notice on the notion of State aid as referred to in Article 107(1) TFEU, is intended to result in an easier, more transparent, and more consistent application of the notion of state aid across the EU.

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EU Releases Clarifications on State Aid

These clarifications have been designed to help tax authorities and companies (amongst others) identify circumstances where measures can be granted by a member state without needing approval under EU states aid rules.

Key clarifications - tax measures

The Notice on the Notion of State Aid provides guidance on whether specific tax measures may be considered to constitute state aid. In particular, the EU Commission comments on the following tax measures:

  • Administrative tax rulings and tax settlements (discussed below)
  • Cooperative societies
  • Collective investment undertakings
  • Tax amnesties
  • Depreciation/amortization rules
  • Fixed basis tax regime for specific activities (for example, in agriculture or fisheries)
  • Anti-abuse rules, andExcise duties. 

Tax rulings and settlements

The document discusses tax rulings and settlements. Specifically, it refers to the arm's length principle and to the guidance provided in the OECD's Transfer Pricing Guidelines for assessing whether transfer pricing rulings constitute state aid. The notice explains that, while the OECD guidelines do not explicitly deal with state aid, they do capture the international consensus on transfer pricing. When rulings are in-line with the OECD approach, they are unlikely to give rise to state aid, according to the EU Commission.

According to the EU Commission, tax rulings confer a selective advantage when:

  • The ruling misapplies national tax law, resulting in a lower amount of tax
  • The ruling is not available to all undertakings in similar legal and factual situations, or
  • The administration applies a more favorable tax treatment compared to other taxpayers in similar legal and factual situations.

As for tax settlements regarding disputes over the amount of tax owed, the Commission concludes that these settlements may involve State aid, especially if the amount of tax due has been reduced without clear justification.

For more information, contact your KPMG adviser.

Disclaimer

Information is current to May 31, 2016. 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

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