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EU Court Reaches Decisions on Starbucks & Fiat State Aid Cases

EU Court Reaches Decisions on Starbucks & Fiat State Aid Cases

In a landmark decision, the European Union’s Court decided that American coffee giant Starbucks did not receive state aid in the Netherlands and does not have to pay close to 30 million Euros in back taxes to Dutch tax authorities.

Europe second highest court, the General Court, said of the decision: “The (European) Commission was unable to demonstrate the existence of an advantage in favour of Starbucks.”

The General Court decided that it “rejects the claim that the Commission erred in identifying an arm’s length principle as a criterion for assessing the existence of State aid.”

Both Starbucks and the Dutch government praised this decision.

The Netherlands’ State Secretary for Finance, Menno Snel, said, “I am pleased that the European Commission's case on Starbucks against the Netherlands on state aid has been clarified.”

“This judgment means that the tax service did not treat Starbucks better or differently from other companies,” Snel added.

Additionally, a spokesperson for Starbucks said that this ruling “makes clear Starbucks did not receive any special tax treatment from the Netherlands. Starbucks pays all of its taxes wherever they are due.”

Speaking about the decision, the EU’s Competition Commissioner Margrethe Vestager said, “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.”

Furthermore, this decision, Vestager added, “confirmed the commission’s approach to assess whether a measure is selective and if transactions between group companies give rise to an advantage under EU state-aid rules based on the so-called ‘arm’s length principle’.”

Fiat Loses Appeal Before EU Court

Fiat Loses Appeal Before EU Court

In a similar case involving car manufacturer Fiat Chrysler, the EU Court upheld its decision obliging the company to cough up roughly 30 million Euros in back taxes to Luxembourg.

More specifically, the court determined that the EU was “fully entitled to conclude that the tax ruling at issue conferred an advantage.”

Luxembourg’s government immediately announced it would “analyze the judgment,” and highlighted that it has performed “numerous reforms to find against fiscal fraud and tax evasion” during the past several years.

A spokesperson for the car manufacturer told CNBC that the company is “disappointed with the General Court’s judgment and is considering the next steps to take in this matter.”

“The matter is not material to the Group,” the spokesperson added.

As reported by Euronews, these two decisions, which were first reached back in 2015, originally “said Starbucks and Fiat Chrysler set prices for goods and services sold between subsidiaries, known as transfer prices, that were below market rates and which artificially lowered their taxes.”

Natura Garcia, a lawyer who works for Linklaters in London, believes “the principles laid down in these judgments provide some ammunition for both the taxpayers and the commission in the ongoing investigations.”

“[This] mixed outcome demonstrates that the General Court is willing to support the commission in its state aid investigations into transfer-pricing rulings in principle, within certain boundaries,” added Garcia.

Both of these cases can now be appealed before the European Court of Justice, the EU highest court.

Are you ready for the next phases in these battles between the EU, member states and multinational giants?

Stay tuned for more!