EU: Fiscal state aid and BEPS: EU Commission launches series of in-depth investigations into specific tax rulings and regimes

Bob van der Made

At the beginning of 2014, the European Commission announced a new focus on EU fiscal state aid. This was triggered by the unfolding OECD/G20s Base Erosion and Profit Shifting (BEPS) Action Plan and must also be seen in the context of the EU's own agenda to crack down on aggressive tax planning, tax avoidance and tax evasion by multinational companies. In concrete terms, this has resulted in the opening of a series of investigations into specific tax rulings and tax regimes. These cases have attracted a considerable amount of attention from the Commission. On specific tax rulings, the Commission took three decisions to launch formal investigations in this new context on June 11 2014, with regard to alleged aid to Apple in Ireland, alleged aid to FFT (allegedly Fiat Finance and Trade) in Luxembourg, and alleged aid to Starbucks in The Netherlands. On October 7 2014, the Commission announced a fourth in-depth investigation, namely with respect to alleged aid to Amazon in Luxembourg.

Also as part of this new focus on State aid and BEPS, the Commission announced on October 1 that it would examine the Gibraltar tax rulings practice from the perspective of the EU state aid rules. In addition, in its decision of October 15 2014, the Commission concluded that a new interpretation of the Spanish tax authorities allowing companies to amortise for tax purposes the financial goodwill on indirect shareholdings is incompatible with EU state aid rules.

The first non-confidential versions of the Commission's decisions on the specific tax rulings for Apple in Ireland and (allegedly) Fiat in Luxembourg were published in the Official Journal of the European Union (OJ) on October 17 2014. Publication of the non-confidential version of the Starbucks decision is pending agreement between the Commission and The Netherlands on what version can ultimately be published. The publication of the non-confidential version of the Amazon decision is expected in the next two months as well.

Short summaries of the Apple and (allegedly) Fiat decisions are now available in the OJ on the EU's Europa website in all 23 official EU languages. The Commission's letters to the two respective member states under scrutiny are available in the OJ in the authentic language only.

Publication in the OJ (of a non-confidential version of a Commission decision) constitutes the next step in the EU's formal state aid investigation procedure. Pursuant to article 108(2) of the Treaty on the Functioning of the European Union (Text with EEA relevance) interested parties are invited to submit their comments on the aid in respect of which the Commission is initiating the procedure within one month of the date of publication to the state aid registry of the Directorate-General Competition of the European Commission. The Commission will communicate those comments to the relevant member state(s).

'Interested party' is defined in Council Regulation (EC) No 659/1999 of March 22 1999 as: "any member state and any person, undertaking or association of undertakings whose interests might be affected by the granting of aid, in particular the beneficiary of the aid, competing undertakings and trade associations". Confidential treatment of the identity of the interested party submitting the comments may be requested in writing, stating the reasons for the request.

With regard to the timetable for the European Commission to come to a final decision in these investigations, in case of non-notified – and therefore unlawful – new fiscal aid, the Commission is under no legal obligation to give its decisions within a certain time limit. Depending on the communication with the member states concerned, the complexity of the issue, the number of interested parties, and so on, the period between the first investigation and the final decision may easily take up to two years or even more.

Bob van der Made (bob.van.der.made@nl.pwc.com)

PwC

Tel: +31 88 792 3696

Website: www.pwc.com/eudtg