On June 3, 2016 the European Commission released a Directorate-General for Competition (DG Competition) Working Paper on State Aid and Tax Rulings. This DG Competition working paper aims to provide a short summary of the DG Competition’s preliminary orientations for the inquiry into tax rulings. According to the working paper the inquiry has provided DG Competition with a first overview of the tax ruling practice of the Member States and of tax planning strategies utilized by integrated corporate groups.
Since 2013, the Commission’s DG Competition has been carrying out an inquiry into tax ruling practices from this perspective of EU State aid rules. By the end of 2014, all Member States had been asked to provide information about their tax ruling practice and the legal framework underlying that practice, as well as a list of tax rulings issued in the years 2010 to 2012 (and partly 2013). On the basis of this information, DG Competition requested specific tax rulings. According to the working paper DG Competition has looked at more than 1,000 tax rulings.
The inquiry has focussed, in particular, on tax rulings which endorse transfer pricing arrangements proposed by the taxpayer for determining the taxable basis of an integrated group company. The Commission has also analysed “confirmatory rulings”, which confirm the application, or the non-application, of a certain legislative provision to a specific situation.
The inquiry led, in mid-2014, to the opening of three formal State aid investigations by the Commission on tax rulings granted by Ireland (to Apple), Luxembourg (to Fiat) and the Netherlands (to Starbucks). Further investigations were opened by the Commission later the same year and in 2015 on tax rulings granted by Luxembourg (to Amazon and to McDonald's) and by Belgium (the Excess Profit scheme). At the end of 2015 and the beginning of 2016, the Commission adopted three negative decisions with recovery with respect to the tax ruling granted by the Netherlands to Starbucks, the tax ruling granted by Luxembourg to Fiat and the Excess Profit Scheme in Belgium. Those decisions provide further guidance to Member States' tax administrations and multinational corporate groups on how the Commission applies the EU State aid rules in this field. The Commission is continuing its investigations concerning the tax treatment of Apple by Ireland, and Amazon and McDonald's by Luxembourg. It will open further investigations if it has serious reasons to consider that State aid may have been granted by way of a tax ruling in other cases.
Subsequently the working paper gives preliminary findings of the ruling investigation with respect to transfer pricing rulings, which it breaks down in 2 pieces:
· Different Member States' practices
· Tax rulings: how to approximate market prices.
The working paper concludes by providing the following conclusion: “State aid control in tax rulings follows from the Commission's competence in the field of State aid as set out in the EU Treaties to investigate cases under State aid rules with the objective to prevent distortions of competition through the granting of special tax advantages that are not available to all similarly situated taxpayers in a given Member State.”
Click here to be forwarded to the DG Competition Working Paper on State Aid and Tax Rulings as available on the website of the European Commission, which will open in a new window.
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