EU and State Aid

Posted on | By SBN

The definition of state aid is found in Article 107(1) TFEU. In order for state aid to be present all of the following four conditions need to be fulfilled:

  • Aid must be present; i.e. a financial advantage such as a tax benefit. Such aid must be granted by an EU Member State (or any lower level of government) or through state resources, in a manner attributable to that state.
  • Such aid should distort or threaten to distort competition and affect trade between EU Member States.
  • Such aid should favor certain undertakings or the production of certain goods; i.e. it needs to be ‘selective’.

In 2001, the EU Commission launced a number of investigations into “transfer pricing schemes” launched by Belgium, Luxembourg and the Netherlands in relation to Apple, Starbucks, Fiat,  and Amazon.

Related content:
  1. European Commission vs. UK, October 2017, State aid, CFC
    The European Commission has opened an in-depth probe into a UK scheme that exempts certain transactions by multinational groups from the application of UK rules targeting tax avoidance. It will investigate if the scheme allows these multinationals to pay less UK tax, in breach of EU State aid rules.  ...
  2. US vs. GlaxoSmithKlein, July 2001, United State Tax Court
    This joint application to allow depositions found Glaxo and the IRS jointly petitioning the tax court for permission to depose two former Glaxo executives in anticipation of an evential Section 482 challenge to Glaxo’s taxable revenue calculations. The Court granted the joint application. The decision is interesting as it pertains to the submission of evidence in disputes with the IRS.  ...
  3. European Commission vs Luxembourg and Fiat, October 2015, State Aid Decision
    The European Commission have decided that selective tax advantages for Fiat in Luxembourg are illegal under EU state aid rules.  ...
  4. European Commission vs. Ireland and Apple, August 2016, State Aid Decision
    According to the European Commission Ireland gave illegal tax benefits to Apple worth up to €13 billion The European Commission has concluded that Ireland granted undue tax benefits of up to €13 billion to Apple. This is illegal under EU state aid rules, because it allowed Apple to pay substantially less tax than other businesses. Ireland must now recover the illegal aid.  ...
  5. US-vs-Analog-Devices-Subsidiaries-Nov-22-2016-United-State-Tax-Court-147-TC-no-15
    In this case the US Tax Court held that a closing agreement did not result in retroactive indebtedness. Analog Devices Corp. repatriated cash dividends from a foreign subsidiary and claimed an 85% dividends received deduction for FY 2005, cf. US regs § 965. No related party indebtedness was reported by the company which would have limited the deduction available. During the audit of Analog Devises Corp. the IRS claimed that a 2 pct. royalty from the subsidiary...
  6. European Commission vs. Amazon and Luxembourg, October 2017, State Aid – Comissions decision, SA.38944 
    Luxembourg gave illegal tax benefits to Amazon worth around €250 million   The European Commission has concluded that Luxembourg granted undue tax benefits to Amazon of around €250 million.  Following an in-depth investigation launched in October 2014, the Commission has concluded that a tax ruling issued by Luxembourg in 2003, and prolonged in 2011, lowered the tax paid by Amazon in Luxembourg without any valid justification. The tax ruling enabled Amazon to shift the vast...
Category: TP Explained