The long-awaited judgments by the General Court of the EU – on whether unlawful stated aid purportedly granted by the Netherlands and Luxembourg to Starbucks and FIAT – have received much public attention. And with good reason. While applying state aid rules to tax matters is nothing new, it is the first time that an EU court decides on the substantive aspects of two of the pending individual tax ruling cases. When examining the judgments in light of established state aid case law, it is clear that these cases are not really ground-breaking. Instead, they reconfirm the Commission’s authority to determine whether state aid in the form of a tax benefit has been granted, including the testing of whether the transfer prices for intra-group transactions agreed upon in the tax ruling are a sufficiently reliable approximation of market prices. For this assessment, the OECD transfer pricing guidelines are an important tool because they reflect international consensus.
Interestingly, the General Court reviews extensively the Commission’s transfer pricing assessment, and how to allocate the burden of proof (with the Commission losing in Starbucks, and winning in FIAT). Further, some features of the judgments could have wider implications for other pending cases and, in general, for taxpayers that have struck deals with the revenue in an EU member state in some shape or form. Click here to read more about our observations on these points. Please click here if you want to learn more about what to do as general counsel.
Despite the clear judgments, nothing is set in stone yet, as there will inevitably be an appeal to the European Court of Justice.