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Luxembourg To Appeal EU Commission's Fiat Decision

by Ulrika Lomas, Tax-News.com, Brussels

07 December 2015


The Government of Luxembourg said on December 4 that it will appeal against the European Commission's decision against its tax ruling for Fiat.

The Commission in October 2015 decided that Luxembourg's ruling for Fiat does not reflect economic reality such that it grants a selective tax advantage to the company in breach of EU law. As a result, the Commissioner ordered Luxembourg to recover an amount of about EUR20m in "unpaid tax" from Fiat.

In its response, Luxembourg's Ministry of Finance said that the Government has decided to appeal the Commission's decision to "get legal clarity and predictability as to the practice of tax rulings."

The Ministry said that the "vast majority of EU member states use tax rulings to provide legal certainty to the taxpayer. In its decision, the Commission has resorted to unprecedented criteria for the establishment of the alleged state aid, putting into question the principle of legal certainty. In particular, the Commission does not demonstrate the existence of a selective advantage granted to Fiat, in the sense of Article 107 of the Treaty on the Functioning of the European Union."

"Luxembourg is firmly committed to transparency in tax matters and the fight against tax evasion. Luxembourg fully supports the base erosion and profit shifting project of the Organization for Economic Co-operation and Development and the Group of Twenty, which has modernized international taxation and created a level playing field."

The Commission had found that the ruling for Fiat Finance and Trade was not at "arm's length" because of "a number of economically unjustifiable assumptions and downward adjustments," which meant that "the capital base approximated by the tax ruling is much lower than the company's actual capital." Further, "the estimated remuneration applied to this already much lower capital for tax purposes is also much lower compared to market rates," it said.

The Commission said its assessment shows that in the case of Fiat Finance and Trade, if the estimations of capital and remuneration applied had corresponded to market conditions, the taxable profits declared in Luxembourg would have been 20 times higher.

TAGS: compliance | Finance | tax | investment | business | European Commission | tax compliance | tax avoidance | law | Organisation for Economic Co-operation and Development (OECD) | Luxembourg | enforcement | ministry of finance | tax authority | agreements | multinationals | tax planning | transfer pricing | tax reform | regulation | trade | European Union (EU) | Europe

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