UK and International Tax news
EC Publishes Details Of State Aid Investigation Into Starbucks Netherlands Tax Ruling
Tuesday 18th November 2014
Following the publication last month by the EC of its findings in relation to corporate income tax paid by Apple in Ireland and Fiat in Luxembourg [see our International Tax News item of 3 October 2014], it has now published a redacted version of its 40 page report detailing its findings into tax rulings in the Netherlands with regard to the corporate income tax paid by Starbucks.
Starbucks Manufacturing BV is a coffee roasting house based in Amsterdam, and is the only such facility located outside the US. It is supplied with coffee beans by Starbucks Coffee Trading Company SARL, a Swiss subsidiary. The beans are bought for the benefit of the entire Starbucks corporate group worldwide, and for roasting and packaging in the Netherlands. Starbucks Manufacturing BV also licences IP from its UK shareholder Alki LP which allows it to produce and deliver coffee to shop operators in return for a royalty paid to Alki LP.
The EC’s preliminary view is that it has doubts on the APA in favour of Starbucks Manufacturing EMEA BV, in particular the qualification of the Dutch company as a low risk manufacturer, the adjustments made to the cost base and the calculation of royalties. Given these doubts, the EC considers the APA may constitute staid aid according to Art 107(1) TFEU and there is incompatibility of such aid with the internal market.
The EC has requested the Netherlands to submit its comments and to provide further information in respect of Alki LP, the contract with the Swiss supplier, and the transfer pricing report on the purchase price of the coffee beans or, in its absence, a report on how this price is determined.
The Dutch Ministry of Finance has initially responded to the EC’s report and has confirmed that in its view the arm’s length principle has been carefully implemented in its legislation which is fully in line with the international standard laid down in Art 9 of the OECD Model Tax Connvention, and therefore disagrees that Starbucks Manufacturing BV has been given any state aid.
Starbucks has been given one month to respond.Contact Us