Although the Commission has no direct authority over national tax systems, it can investigate whether certain fiscal regimes, including in the form of tax rulings, would constitute “unjustifiable” State aid to companies. The EU’s State aid rules are set out in the Treaty on the Functioning of the European Union (TFEU) and constitute part of the TFEU’s provisions on competition law. In general, Member States are prohibited from granting financial assistance in a way that distorts competition, unless the aid measure has been notified to and authorized by the Commission. The prohibition applies to any form of financial aid, including in the form of tax rulings. Although not problematic in themselves, tax rulings may amount to unlawful State aid if they provide selective advantages to a specific company or group of companies that are not approved under EU State aid rules.
Article 108(3) TFEU requires Member States to notify non-exempted State aid measures, including in the form of tax measures, to the Commission before their implementation, and to await the Commission’s approval before implementing such measures (the so-called “standstill obligation”). If either of those obligations is not fulfilled, the State aid measure is considered to be unlawful.
A notification triggers a preliminary investigation by the Commission. The Commission can also investigate unnotified State aid that has already been granted on its own initiative or following a third-party complaint. If, following an in-depth investigation, the Commission finds that a measure constitutes illegal State aid, the Commission will require the Member State to recover the aid from the beneficiary (unless such recovery would be contrary to a general principle of EU law). In the case of tax measures, the amount to be covered is calculated “on the basis of a comparison between the tax actually paid and the amount that should have been paid if the generally applicable rule had been applied”. Interest is added to this basic amount. Recovery of past benefits can be ordered for up to ten years.
The Commission’s decisions opening in-depth investigations into Amazon’s, Apple’s, FFT’s and Starbucks’ tax rulings (the Opening Decisions) shed more light on the Commission’s concerns as to the compatibility of tax rulings with EU State aid rules. According to the Opening Decisions, the Commission’s preliminary view is that the contested tax rulings constitute unlawful State aid under EU law.