The EU general court has annulled the European Commission’s 2015 state aid decision against tax rulings granted to Starbucks in the Netherlands, while upholding the Commission’s decision that Luxembourg granted selective tax advantages to Fiat.
Following state aid investigations, the Commission concluded in 2015 that a tax ruling granted by Luxembourg in favour of Fiat Finance and Trade and an advance pricing agreement (APA) between the Netherlands tax authorities and Starbucks Manufacturing EMEA BV conferred selective tax advantages on these companies.
Fiat Finance and Trade (now Fiat Chrysler Finance Europe), based in Luxembourg, provided financial services, such as intra-group loans, to other Fiat group car companies. The Commission's investigation concluded that a tax ruling issued by the Luxembourg authorities in 2012 had reduced the company’s tax burden by €20-€30m between 2012 and 2015.
The Court agreed with the Commission that the methodology for calculating the Fiat’s remuneration covered by the tax ruling, which excluded certain shareholdings in other group companies, did not enable an arm’s length remuneration to be obtained, resulting in a reduction of taxable profit.
Starbucks Manufacturing EMEA BV, based in the Netherlands, sold and distributed roasted coffee and coffee-related products to Starbucks outlets in Europe, the Middle East and Africa. The Commission’s decision was particularly concerned with two aspects of the APA in the Netherlands, which allowed for:
payment of a substantial royalty to Alki (a UK-based company in the Starbucks group) for coffee-roasting know-how; and
payment of an inflated price for green coffee beans to Swiss-based Starbucks Coffee Trading SARL.
The court held that by simply arguing that the wrong methodology had been used to determine the company’s remuneration, the Commission had failed to demonstrate that this conferred a tax advantage on the company or that the royalty did not conform to the arm’s length principle. Similarly, the price of green coffee beans was outside the scope of the APA and the Commission had not demonstrated the existence of a tax advantage.
EU competition commissioner, Margrethe Vestager, issued a statement saying the court judgments: ‘give important guidance on the application of EU state aid rules in the area of taxation. At the same time, each case has its specificities and involves complex legal questions. We will study the judgments carefully before deciding on possible next steps.’
The EU general court has annulled the European Commission’s 2015 state aid decision against tax rulings granted to Starbucks in the Netherlands, while upholding the Commission’s decision that Luxembourg granted selective tax advantages to Fiat.
Following state aid investigations, the Commission concluded in 2015 that a tax ruling granted by Luxembourg in favour of Fiat Finance and Trade and an advance pricing agreement (APA) between the Netherlands tax authorities and Starbucks Manufacturing EMEA BV conferred selective tax advantages on these companies.
Fiat Finance and Trade (now Fiat Chrysler Finance Europe), based in Luxembourg, provided financial services, such as intra-group loans, to other Fiat group car companies. The Commission's investigation concluded that a tax ruling issued by the Luxembourg authorities in 2012 had reduced the company’s tax burden by €20-€30m between 2012 and 2015.
The Court agreed with the Commission that the methodology for calculating the Fiat’s remuneration covered by the tax ruling, which excluded certain shareholdings in other group companies, did not enable an arm’s length remuneration to be obtained, resulting in a reduction of taxable profit.
Starbucks Manufacturing EMEA BV, based in the Netherlands, sold and distributed roasted coffee and coffee-related products to Starbucks outlets in Europe, the Middle East and Africa. The Commission’s decision was particularly concerned with two aspects of the APA in the Netherlands, which allowed for:
payment of a substantial royalty to Alki (a UK-based company in the Starbucks group) for coffee-roasting know-how; and
payment of an inflated price for green coffee beans to Swiss-based Starbucks Coffee Trading SARL.
The court held that by simply arguing that the wrong methodology had been used to determine the company’s remuneration, the Commission had failed to demonstrate that this conferred a tax advantage on the company or that the royalty did not conform to the arm’s length principle. Similarly, the price of green coffee beans was outside the scope of the APA and the Commission had not demonstrated the existence of a tax advantage.
EU competition commissioner, Margrethe Vestager, issued a statement saying the court judgments: ‘give important guidance on the application of EU state aid rules in the area of taxation. At the same time, each case has its specificities and involves complex legal questions. We will study the judgments carefully before deciding on possible next steps.’
