Starbucks deal disputed by EU

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After a very early anouncement in June 2014 the EU on the 21st of October 2015 finally published their position on the transferpricing deal between the Dutch governement and Starbucks.

Commissioner Vestager stated that: “Tax rulings that artificially reduce a company’s tax burden are not in line with EU state aid rules.” The press release that was issued also states that the ruling was “selective”. The EU ordered the Netherlands to retrieve the tax that in their opinion should have been charged.

The press release does not state that The Netherlands have broken any rules on transfer prices, which is odd. Also the Dutch tax office and Starbucks were not fined for this. The question whether transferpricing rules were broken is ofcourse very important. The construction might be very complex but if it is in line with the existing rules there should not be a problem.Complexity of the rules is one of the reasons to request an advance ruling.

The position of the EU that this is state aid only will hold if in another identical situation the Dutch governement refused to provide an identical advance ruling. But maybe there is not another company with similar circumstances. In that case it will be very difficult to prove the selective nature of the agreement.

The EU wants The Netherlands to retrieve the tax from Starbucks. An advance tax ruling is an agreement between a company and the tax office. If one of the parties violates the terms of the agreement that certainly would lead to claims from the counter part. Again it is odd that this is what the EU asks the Netherlands to do.

A logical explanation could be that the EU found no violations in this deal. To prevent loss of face they tried to solve it in this way. Also political reasons might have triggered this approach. Case not yet closed.

Through this link you can find the press release of the EU. http://europa.eu/rapid/press-release_IP-15-5880_en.htm

October 21, 2015