Fiat will have to reimburse the approximately €30 million in tax benefits it received in Luxembourg. On Tuesday 24 September (judgment in Joined Cases T-755/15 and T-759/15), the General Court of the European Union confirmed the validity of the European Commission's 2015 decision (see EUROPE 11415/1) on the illegal aid granted by Luxembourg to Fiat Chrysler Finance Europe, formerly Fiat Finance and Trade (FFT).
The Court dismissed the actions of Luxembourg and FTT against the decision of the European Commission according to which FTT had received a selective advantage through a tax ruling granted by Luxembourg and requesting Luxembourg authorities to recover from FTT the aid that is illegal and incompatible with the single market (see EUROPE 11446/17).
The Court concluded that, in examining whether the advance ruling at issue was in conformity with the State aid rules, the Commission did not carry out any “tax harmonisation”, as Luxembourg and FTT claimed, but simply exercised its competence under Union law, verifying whether the advance ruling conferred an advantage on the recipient over so-called “normal” taxation.
“The Commission was right to consider that the advance ruling in question conferred an advantage on FFT on the ground that it reduced FFT's tax burden compared with that which it should have paid under Luxembourg tax law”, the Court held.
It also considered that the recovery of the aid in question was not contrary to the principle of legal certainty or the rights of the defence.
The European Commission welcomed this decision and considered that the judgment confirmed its approach to assessing whether a measure is selective and whether transactions between group companies give rise to an advantage under Community State aid rules based on the principle of “full competition”.
The Luxembourg Government has, for its part, taken note of the judgment and intends to analyse it “with all due diligence and reserves all its rights”. It also recalls that in recent years it has implemented several reforms to combat tax evasion and fraud, including an administrative circular regulating the activity of intra-group financing companies from a transfer pricing perspective.
On Tuesday, the General Court delivered another judgment annulling a similar Commission decision concerning Starbucks (see other news).
“Today's judgments give important guidance on the application of EU State aid rules in the area of taxation. At the same time, each case has its specificities and involves complex legal questions. We will study the judgments carefully before deciding on possible next steps”, said European Competition Commissioner Margrethe Vestager in a statement.
This new jurisprudence has provoked a mixed reaction from civil society. For Oxfam and Eurodad, these two judgments show above all that the EU's state aid rules do not make it possible to close all the loopholes in the international tax system and that international reform is urgently needed.
See the judgment: https://bit.ly/2mVcw9h (Original version in French by Marion Fontana)