The judgment of the General Court of the European Union upholding the European Commission’s October 2015 decision that Luxembourg’s tax ruling in favour of Fiat is incompatible with the internal market (see EUROPE 11415/1) must be annulled, said Priit Pikamäe, Advocate General of the Court of Justice of the European Union, in a Opinion delivered on Thursday 16 December (cases C-885/19P and C-898/19P).
Ireland, supported by Luxembourg, and Fiat Chrysler Finance Europe applied to the Court asking it to set aside the judgment of the General Court of September 2019 which validated the Commission’s decision (see EUROPE 12334/12). In particular, Dublin contests the analysis made by the General Court to determine the existence of an economic advantage granted by Luxembourg to Fiat through the tax ruling at issue, more particularly from the point of view of the rules applicable to State aid (first ground).
In his conclusions, Mr Pikamäe notes that the assessment of whether a tax ruling confers an undue economic advantage on the beneficiary company requires an examination of the national tax regime that would be applicable in the absence of the adoption of such a measure (taxation known as ‘normal’) under arm’s length principle conditions.
In order to define such normal taxation, the same criteria established by the Court’s case law for the determination of the frame of reference should be used. In particular, according to Mr Pikamäe, normal taxation must be determined on the basis of standards of national law as well as EU and international law transposed into the domestic legal order. It includes only those rules and principles which constitute the normative translation of the will of the national legislator and cannot therefore be based on the objective allegedly pursued by that legislator, the Advocate General points out.
Tracing the origin and evolution of the arm’s length principle developed by the Commission, Mr Pikamäe suggested that the Court should uphold the first ground, finding that the General Court erred in law by approving the normal taxation as identified by the Commission for the purposes of examining the existence of an economic advantage (Article 107(1) TEU). In his view, an error in the determination of the frame of reference vitiates the whole analysis of the selectivity of the advance tax ruling.
The Advocate General asked the Court to give a final ruling on the case, finding that the General Court had violated the provisions governing the division of powers between the EU and its Member States.
See the conclusions: https://bit.ly/3m7UtrW
Case C-885/19. However, the Advocate General proposes that the Court should dismiss the action brought by Fiat Chrysler Finance Europe.
He considers that the General Court was right to hold that the Commission was not obliged to take into account the intra-group and cross-border dimension of the effects of the tax ruling at issue when assessing whether that decision conferred an economic advantage.
See the conclusions: https://bit.ly/30vziIP (Original version in French by Mathieu Bion)