The enforcement of EU State aid rules in relation to tax rulings is a key priority for the EU’s Directorate-General for Competition (DG COMPETITION) under Commissioner Vestager. Most recently, DG COMPETITION announced on December 3, 2015 that it has opened an in-depth investigation into rulings by the Luxembourg tax authorities with regard to McDonald’s corporate income tax.1 The McDonald’s investigation is the sixth such case. The Commission has opened four other investigations into alleged aid to specific companies – Amazon, Apple, Fiat Finance and Trade (FFT), and Starbucks – and one into potential aid granted under the Belgian ”excess profit” tax regime.2
The Commission has already adopted negative decisions finding that Luxembourg and Dutch rulings in favor of FFT and Starbucks, respectively, amounted to illegal State aid and ordering the Member States concerned to recover the unpaid tax from FFT and Starbucks.3 Investigations in the other three cases are still ongoing, but the Commission is expected to issue additional decisions soon. With the exception of the recent McDonald’s case, all of these investigations relate to intra-group tax arrangements, but they concern a variety of intra-group transactional practices, from purchases and sales of goods, to intra-group lending arrangements, to intellectual property licensing.
The Commission’s use of EU State aid rules to investigate tax ruling practices is highly controversial, and legal challenges to the Commission’s position are likely to run for years. Meanwhile, however, the Commission’s aggressive challenges to well-established tax planning practices will likely impact multinationals in activities ranging from internal tax structuring to merger and acquisition planning. Many multinationals will also want to review their existing tax rulings and structuring in light of the Commission’s positions.
The Commission’s State aid investigations reflect a more general increased focus on taxation in the current Commission. The Commission is also conducting a wider inquiry into certain tax practices of several Member States, which in December 2014 was extended to all Member States. In June 2015, the Commission unveiled a series of initiatives to tackle tax avoidance, secure sustainable tax revenues and strengthen the Single Market for businesses. The proposed measures, which are part of the Commission’s Action Plan for fair and effective taxation,4 aim to significantly improve the corporate tax environment in the EU, making it fairer, more efficient and more growth-friendly. In addition, in October 2015, the Member States unanimously agreed to the automatic exchange of information on their tax rulings as of 1 January 2017.5