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Very little comfort

17 November 2015 / Conor Brindley
Issue: 4527 / Categories: Comment & Analysis , Employees
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Summary of the recent European Union tax rulings on the state aid rules. 

KEY POINTS
  • The European Commission says that comfort letters by tax authorities are illegal.
  • Luxembourg and the Netherlands negotiated advance pricing agreements.
  • The rulings provided favourable tax treatment.
  • The commission is combatt ing harmful tax competition.

On 21 October 2015 the European Commission announced that so-called “comfort letters” given by the tax authorities of Luxembourg and the Netherlands to Fiat Finance and Trade and Starbucks were illegal under EU state aid rules. Accordingly the commission has ordered Luxembourg and the Netherlands to recover the unpaid tax from Fiat and Starbucks (between €20m and €30m for each taxpayer). Unsurprisingly the governments of those countries disagree with the commission’s decision and are likely to appeal.

 

State aid rules

The Treaty on the Functioning of the European...

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