The European Commission issued a letter to respond to concerns expressed by the U.S. Treasury Secretary about EC state aid investigations of “tax rulings” issued by EU Member States to multinational companies.
The European Commission has focused on tax evasion and tax fraud, giving these top priorities. As a result, “tax rulings”—including for example advance pricing agreements (APAs)—have increasingly become the center of attention. In December 2014, the EC launched a general investigation into the tax ruling practices of all EU Member States.
Since then, in-depth investigations have been opened concerning tax rulings granted to certain multinational companies by some EU Member States and concerning the Belgium excess profit ruling system. In October 2015, the EC published the first two final decisions that ordered two multinational companies operating in Luxembourg and in the Netherlands to repay up to €30 million in “illegal state aid.” In January 2016, the EC further announced an intention to examine a recent tax settlement negotiated by a multinational company with the UK tax administration.
Certain U.S. politicians and officials have expressed concerns that the EC state aid investigations are unfairly targeting U.S. companies, and thereby creating potential compliance issues under current international tax standards.
In February 2016, U.S. Treasury Secretary Jacob Lew wrote to the EC and requested that the European Union reconsider these state aid investigations. Lew’s letter asserting that such unilateral moves represented disturbing precedents. In his letter, Secretary Lew referred to testimony presented by a senior international tax officer of the U.S. Treasury at a December 2015 hearing of the U.S. Senate Finance Committee, and asserted that the EC:
European Commissioner Vestager on 29 February 2016 wrote in reply to Secretary Lew on behalf of President Juncker. In her February 2016 letter [PDF 252 KB], Commissioner Vestager:
© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor 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 on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.