UK and International Tax news

EU General Court Annuls EC Decision On State Aid Investigation Into Starbucks In The Netherlands

Friday 27th September 2019

The EC General Court has annulled the EC 2015 decision that tax rulings granted by the Netherlands to Starbucks were not in line with EU State aid rules.

In 2008, the Netherlands tax authorities concluded an advance pricing arrangement (APA) with Starbucks Manufacturing EMEA BV (SMBV), part of the Starbucks group, which, inter alia, roasts coffees. The objective of that arrangement was to determine SMBV’s remuneration for its production and distribution activities within the group. Thereafter, SMBV’s remuneration served to determine annually its taxable profit on the basis of Netherlands corporate income tax. In addition, the APA endorsed the amount of the royalty paid by SMBV to Alki, another entity of the same group, for the use of Starbucks’ roasting IP. More specifically, the APA provided that the amount of the royalty to be paid to Alki corresponded to SMBV’s residual profit. The amount was determined by deducting SMBV’s remuneration, calculated in accordance with the APA, from SMBV’s operating profit.

In 2015, the EC found that the APA constituted aid incompatible with the internal market1and ordered the recovery of that aid. The Netherlands and Starbucks brought an action before the General Court for annulment of the EC decision, and in particular disputed the finding that the APA conferred a selective advantage on SMBV.

The General Court analysed the findings of the EC in respect of tax ruling and the actual pricing of intra group transactions and the choice of the arm’s length pricing method adopted [TNMM vs CUP].

Overall, the General Court found that the EC had not managed to demonstrate the existence of an economic advantage within the meaning of Art 107 TFEU and annulled the EC decision.

For more detail on the above, please contact Keith Rushen on 0207 486 2378.



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