Brussels, 14/11/2014 (Agence Europe) - On 14 November, the Commission divulged the details of the doubts it raised with the Dutch authorities over the 'tax rulings' enjoyed by the companies Starbucks Coffee EMEA BV and Starbucks Manufacturing EMEA BV.
In their letter of 11 June of this year to Frans Timmermans, then Dutch Foreign Minister and now vice-president of the Commission, the competition services of the Commission took the preliminary view that “the anticipatory transfer pricing agreements in favour of Starbucks Manufacturing EMEA constitute State aid”, which it fears is not compatible with the rules of the single market.
Transfer prices are prices invoiced for commercial transactions between different entities of the same group. These prices influence the division of the taxable profit between the subsidiaries of the group established in different countries.
An entity based in Switzerland provides Starbuck Manufacturing with coffee beans, which it roasts before selling them in Starbucks outlets across Europe. Starbucks Manufacturing pays a royalty to Alki in exchange for the intellectual property rights needed for the production and supply process. Alki is a transparent company based in the United Kingdom, in other words it is taxed at the level of its partners. It appears that it pays no tax at all due to loopholes in US legislation, but this is not the subject of the Commission's investigation.
The royalties paid to Alki fluctuate “from year to year and is not in line with sales”, the Commission notes. It explains that the royalty payment is not linked to production, sales or profit. However, under OECD guidelines, it should be. In 2010, the royalty stood at €1 million, €12 million in 2011 and €6 million in 2012. This fluctuation is due to a 'rulings' agreement concluded with the Netherlands, which is itself in the Commission's sights. “In so far as the level of those royalties could be overestimated in view of the value of the intellectual property in question, the Dutch tax authorities conferred an advantage on that undertaking”, the Commission argues.
The Commission also takes the view that treating Starbucks Manufacturing as a manufacturer receiving a royalty ('toll manufacturer'), “despite evidence to the contrary”, is incorrect. It questions the fact that certain costs and two adjustments have been excluded, allowing Starbucks Manufacturing to reduce the basis on which its tax was calculated and retain only its operational costs as calculation basis.
On Friday, the Dutch Finance Ministry and Starbucks reiterated their confidence that the Commission's investigations will show that the multinational receives no selective advantage.
In June, the Commission also opened investigations into tax rulings granted by Ireland to Apple and Luxembourg to Fiat Finance & Trade. More recently, it announced that it was to examine similar agreements concluded between Luxembourg and Amazon. (EL)