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CJEU dismisses Commission's Fiat TP state assistance lawsuit

According to the Commission and EU General Court, a Luxembourg judgement on Fiat's TP violated state assistance norms.

Today, November 8, the highest court in Europe overturned state assistance rulings against the Fiat Chrysler company in a possibly historic judgement.

The Court of Justice of the EU (CJEU) decided that the European Commission and EU General Court erred in finding that Luxembourg violated state aid regulations by authorising an advance transfer pricing (TP) arrangement for Fiat Chrysler Finance Europe, formerly known as Fiat Finance and Trade (FFT).

The dispute dates back to 2012, when FFT, which supplied funding to the Fiat-Chrysler company, requested approval of the TP agreement from the Luxembourg tax authorities. The government later approved the purchase, stating that its analysis adhered to the concept of impartiality (ALP).

Two years later, in accordance with Article 108(2) of the Treaty on the Functioning of the European Union, the Commission initiated a formal investigation after requesting information from the Luxembourg government regarding its national practise regarding tax rulings.

This clause addresses the validity of governmental aid.

In a 2015 decision, the Commission determined that Luxembourg had improperly awarded FFT and the Fiat group state aid.

The Luxembourg judgement and accompanying TP analysis had unfairly permitted the company to reduce its tax bill "by diverging from the amount that FFT would have been required to pay under the standard corporate income tax system."

FFT and Luxembourg filed an appeal with the General Court, with the Irish government acting on their behalf. The court, which had consolidated the cases, rejected every single argument in its entirety.

On appeal to the CJEU, the justices found error in a number of areas, including the fact that the Commission — later upheld by the General Court — had applied an ALP that was distinct from that prescribed under Luxembourg law.

“It thus confined itself to identifying, in the objective pursued by the general corporate income tax system in Luxembourg, the abstract expression of that principle and to examining the tax ruling at issue without taking into account the way in which the said principle has actually been incorporated into that law with regard to integrated companies in particular.”

It added: “The decision at issue must be annulled in so far as the Commission erred in law in finding that there was a selective advantage in the light of a reference framework comprising an arm’s-length principle which does not derive from a full examination of the relevant national tax law.”

In doing so, the CJEU overturned the General Court's finding and voided the Commission's decision.

According to the legal firm Loyens Loeff, the CJEU's decision could alter the Commission's stance in a number of current cases, including those against Apple and Amazon.

“As the Commission has used a similar approach and reference framework … and has compared the tax position of the beneficiary of the tax ruling with the tax position of any other taxpayer for purposes of assessing the existence of a selective advantage, the CJEU judgment may further weaken the European Commission’s stance in these other cases,” it said in an announcement.



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