Dutch Tax Rulings System May Be Found To Violate EU State Aid Rules


The European Commission is currently examining whether the Dutch system of tax rulings - in particular rulings concluded with multinational companies - is fully compatible with EU state aid rules. The Dutch State Secretary of Finance recently stressed that Dutch tax rulings do not represent state aid. The European Commission may, however, hold a different opinion. In that case a recipient (i.e. taxpayer) will have to repay the unlawful aid together with interest. It is therefore prudent for companies to review whether their Dutch tax rulings are in accordance with EU state aid rules.

State aid might lead to the distortion of competition in the market of the European Union. Article 107(1) of the Treaty on the Functioning of the European Union (TFEU) therefore prohibits state aid to undertakings, unless it is justified by reasons of general economic development. It defines state aid as "aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings (...), in so far as it affects trade between Member States".

The definition of state aid can be broken down into the following elements:

an advantage: a company is to receive an economic benefit which it would not have obtained under normal market conditions. Tax concessions can thus form an advantage by a state or through state resources: the advantage can be received in many forms, such as interest and tax reliefs or state guarantees distortion of competition: state aid is only prohibited if it distorts or may distort competition between companies favouring certain undertakings: the intervention only qualifies as state aid if it confers an advantage to the recipient on a selective basis, for example to a specific company or to companies located in specific regions. General measures open to all undertakings are not selective affecting trade between member states: national matters are outside the scope of the TFEU. State aid can be granted by virtue of law or through individual agreements with the Dutch Tax Authorities. A Dutch tax ruling may therefore...

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