The European Commission has wrongly found that Luxembourg granted unlawful state aid in the form of tax benefits to the Engie group, according to the opinion of Advocate General Juliane Kokott delivered on Thursday 4 May (cases C-451/21 P and C-454/21 P).
On the one hand, only national law is the frame of reference and, on the other hand, only advance tax rulings that are clearly wrong under national law can constitute a selective advantage, according to the Advocate General.
The Court’s judgment will be delivered at a later date and the judges who are to deliberate in this case are not obliged to follow the Advocate General’s opinion.
In June 2018, the Commission concluded that the Engie group had benefited from illegal tax advantages in Luxembourg and demanded that the Grand Duchy recover €120 million from the company of which the French state is the largest shareholder.
The General Court of the EU, seized by Engie and Luxembourg, upheld the Commission’s view in its entirety and dismissed the actions. Engie and Luxembourg then appealed to the Court of Justice.
In her opinion (https://aeur.eu/f/6q7 ), Ms Kokott proposes that the Court of Justice uphold the appeals and, consequently, annul the judgment of the General Court and the Commission’s decision.
Firstly, she notes that advance tax rulings are not, in themselves, unlawful aid. These decisions are, in her view, an important tool for ensuring legal certainty. The Commission considers that these decisions do not raise any problems under State aid law as long as they are open to all taxpayers and comply with the relevant national tax law, which is the only reference framework.
According to the Advocate General, the Commission and the General Court relied from the outset on the wrong frame of reference. Indeed, they considered that the Luxembourg tax law in force at the time contained a corresponding principle, namely that an exemption of income from participations at the level of the parent company implies taxation of the corresponding profits at the level of the subsidiary. However, in Ms Kokott’s view, such a link is not obvious and its existence cannot simply be inferred by way of interpretation in Luxembourg law.
The Advocate General also takes the view that it is therefore not all incorrect advance tax rulings, but only those advance tax rulings that are manifestly incorrect in favour of the taxpayer that can constitute a selective advantage and be considered to be in breach of state aid law.
The Commission has already suffered a series of defeats in similar cases. The car manufacturer Fiat (Stellantis Group) obtained from the CJEU last November the annulment of a decision which required it to repay €30 million of tax benefits to Luxembourg.
The Commission also lost to Apple, Amazon and Starbucks in other tax disputes in Ireland, Luxembourg and the Netherlands. (Original version in French by Lionel Changeur)