UK and International Tax news

AG Proposes CJEU Dismiss Appeal In Fiat State Aid Case

Thursday 30th December 2021

The Advocate General has proposed that the Court of Justice of the EU dismiss the appeal in the Fiat Chrysler v Commission State aid case.

In 2015, following State aid investigations into Fiat Chrysler Finance Europe, the EC decided that Luxembourg had granted selective tax advantages to the company which were illegal under EU state aid rules. The EC ordered Luxembourg to recover the unpaid tax from Fiat in order to remove the unfair competitive advantage it had enjoyed and to restore equal treatment with other companies in similar situations. It also noted that Luxembourg had not notified it of tax rulings it had issued and had not complied with the standstill obligation.

Luxembourg and Fiat each brought actions before the EU General Court for annulment of the EC decision and, in particular, criticised the EC for:

  • having adopted an analysis leading to tax harmonisation in disguise;
  • having found that the tax ruling at issue conferred an advantage, notably on the ground that it did not comply with the arm’s length principle, contrary to Article107 TFEU and to the obligation to state reasons and in breach of the principles of legal certainty and protection of legitimate expectations;
  • having found that the advantage was selective, contrary to Article107 TFEU;
  • having found that the measure restricted competition and distorted trade between Member States, contrary to Article107 TFEU and to the obligation to state reasons.

The General Court dismissed the actions and confirmed the validity of the Commission decision. It specifically rejected the contention that it was engaged in tax harmonization but exercised the power conferred on it by EU law by verifying whether the tax ruling conferred on its beneficiary an advantage as compared to ‘normal taxation’.

The Court confirmed that the fact that the corresponding advantage would be taxed in Italy at the level of another group entity was irrelevant. The Court also endorsed the Commission’s findings that the contested ruling gave a selective and unjustified advantage to the taxpayer, likely to distort competition within the EU.

The AG has now proposed that the Court dismiss the appeal in its entirety. He considered that the Court had correctly held that the Commission was not required to take account of the intra-group and cross-border dimension of the effects of the tax ruling at issue when determining whether that ruling conferred an economic advantage, and that the three errors made, according to the Commission, in the calculation of the remuneration of treasury and financing services provided by FFT prevented an arm’s length outcome from being obtained and could therefore form the basis for a finding of economic advantage.

The Advocate General’s opinion is not binding on the Court of Justice. It is the role of the Advocates General to propose to the Court a legal solution to the cases for which they are responsible. The Judges of the Court are now beginning their deliberations in this case. Judgment will be given at a later date


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