On October 21, 2015 the European Commission announced its decisions that according to the Commission the Netherlands and Luxembourg have given selective tax advantages to Fiat (in Luxembourg) and Starbucks (in the Netherlands) and that according to the European Commission these are illegal under EU state aid rules. Asking what the Dutch and Luxembourg Governments have to say about this decision might be rhetorical. But since on October 21, 2015 both of these Governments published press releases with respect to the decisions of the European Commission, it still might worth to have a look at them.
The Netherlands
The English version of a press release as published on the website of the Dutch Ministry of Finance states the following:
“Reaction of the Dutch authorities to the Commission decision on Starbucks
The Dutch cabinet is somewhat surprised about the decision of the European Commission that Starbucks would have received State aid. It would concern an amount between 20 and 30 million euro in total over a period of several years. The cabinet will study the decision and inform the Parliament within a few weeks.
The Netherlands agrees with the European Commission that State aid should be addressed, also if the State aid is provided by means of tax rulings. The Commission has stated earlier that the Netherlands has a robust and solid ruling practice.
The fact that the Commission observes that there would be State aid in the Starbucks file raises a lot of questions and requires careful consideration. The Netherlands is convinced that actual international standards are applied and shall, therefore, analyse the Commission’s criticism carefully before taking a decision on further steps.
Within the Dutch tax system profit is taxed where value is created. The Tax Authorities have concluded a Advance Pricing Agreement (APA) with Starbucks Manufacturing which includes a business remuneration for the roasting of coffee beans, the so called arm’s length principle.
The Tax Authorities collect taxes on profit which is made by Starbucks Manufacturing in The Netherlands by roasting coffee beans. Because the intellectual property rights of Starbucks are not located in The Netherlands, the royalty’s for the use of these are not taxed in The Netherlands.
The arm’s length principle is carefully implemented in the Corporate Tax Law and the transfer price decree. The legislation and implementation are in line with the OECD guidelines. The method used by The Netherlands in the file of Starbucks Manufacturing is internationally recognized and results in using the same prices within the Starbucks-corporation as prices used between independent parties.
The Netherlands supports a comprehensive, international approach of tax avoidance. Therefore, The Netherlands is actively cooperating with OECD and European Union initiatives in this area.”
Click here to be forwarded to the Dutch version of the press release as available on the website of the Dutch Ministry of Finance.
Luxembourg
The English version of press release as published on the website of the Luxembourg Ministry of Finance states the following (NB this press release is also available in the German and French language):
“Luxembourg disagrees with the conclusions reached by the European Commission in the Fiat Finance and Trade case and reserves all its rights.
Luxembourg will use appropriate due diligence to analyse the decision of the Commission as well as its legal rationale.
Luxembourg already notes that the European Commission has used unprecedented criteria in establishing the alleged State aid. In particular, the Commission has not established in any way that Fiat Finance and Trade received selective advantages with reference to Luxembourg’s national legal framework.
Luxembourg does not consider that Fiat Finance and Trade has been granted incompatible State aid, as foreseen by article 107(1) of the Treaty on the Functioning of the European Union.
Luxembourg adheres to international standards, in particular those relating to the arm’s length principle applicable with respect to transfer pricing, and with State aid rules.”
Click here to be forwarded to the press release as published on the website of the Luxembourg Ministry of Finance (available in French, German and English).
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