UK and International Tax news

Netherlands Government Appeals EC Decision In Starbucks Case

Thursday 3rd December 2015

The Netherlands Government has appealed against the EC decision in October 2015 that it had granted selective tax advantages via tax rulings to Starbucks and that these were illegal under EU state aid rules.

As previously noted in our International Tax News item of 26 October 2015 tax rulings as such are perfectly legal and are comfort letters issued by tax authorities to give a company clarity on how its corporate tax will be calculated or on the use of special tax provisions. However, according to the EC, the tax rulings under investigation endorsed artificial and complex methods to establish taxable profits for the companies and as such did not reflect economic reality. In particular, by setting transfer prices for goods and services sold between companies of the Starbucks group that did not correspond to market conditions, most of the profits of Starbucks’ coffee roasting company were shifted abroad, where they were also not taxed.

The EC had ordered Luxembourg to recover the unpaid tax from Starbucks in order to remove the unfair competitive advantage it had enjoyed and to restore equal treatment with other companies in similar situations. The amounts to recover were €20 – €30 million. It also meant that the Netherlands company could no longer continue to benefit from the advantageous tax treatment granted by these tax rulings.

For more details on the background to the Netherlands rulings, see our previous International Tax News item of November 2014 or contact Keith Rushen on 0207 486 2378.

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