Agreements between companies and authorities in the Netherlands and Luxembourg violate state aid rules, says European commission

A sweetheart tax deal struck in private between Starbucks and Dutch tax officials five years ago has been ruled to be unlawful state aid aid by the European commission.

A second deal between Fiat Chrysler and Luxembourg’s tax authorities also violated European state aid rules, the commission confirmed. The two companies are expected to face tens of millions of euros in additional tax bills.

The move is part of a Brussels crackdown on private tax deals some member states strike with large multinationals. Commission officials are looking at similar deals secured by Amazon in Luxembourg and Apple in Ireland.

Margrethe Vestager, the competition commissioner, said: “Tax rulings that artificially reduce a company’s tax burden are not in line with EU state aid rules. They are illegal. I hope that, with today’s decisions, this message will be heard by member state governments and companies alike. All companies – big or small, multinational or not – should pay their fair share of tax.”

Starbucks said it planned to appeal against the commission’s decision, claiming it contained significant errors. While the decision was technically against the Dutch state for endorsing Starbucks’ controversial structure, the coffee firm said those accused of receiving illegal state aid were entitled to appeal against such a decision in the European courts.

The commission estimates that since 2008 the Dutch tax ruling allowed Starbucks to avoid tax of between €20m and €30m (£14m-£22m). The same sum was estimated to have been avoided at Fiat in the last three years.

Last year, Starbucks’ Dutch unit paid less than €600,000 in tax while Fiat’s Luxembourg subsidiary paid less than €400,000.

There were strong hints of appeals from Luxembourg and the Netherlands, too. The grand duchy’s government said: “Luxembourg notes that the commission has used unprecedented criteria in establishing the alleged state aid. In particular, the commission has not established in any way that Fiat … received selective advantages with reference to Luxembourg’s legal framework.”

The Dutch government said it was “somewhat surprised” by the decision and would study it before deciding whether to lodge an appeal. “Within the Dutch tax system profit is taxed where value is created.”

Starbucks has for years made Amsterdam the heart of its European operations, while Fiat set up group financing activities in Luxembourg. Income from many other countries was shifted into the Netherlands and Luxembourg via interest, royalties and other intra-group payments. Starbucks and Fiat had separately set up complex tax avoidance structures there that meant their income was subject to very low rates of tax.

The commission found the avoidance structures should not have been sanctioned by Luxembourg and the Netherlands in tax rulings, sometimes known as “comfort letters”. They said the member states had endorsed “artificial and complex” structures, devised by Fiat and Starbucks tax planners, that did “not reflect economic reality”.



Brussels competition officials have no powers to challenge generous tax deals offered to multinationals directly. They are only able to intervene if it can be shown that a specific deal was offered to one or more companies and not made available to competitors.



Vestager said the decisions in relation to Starbucks and Fiat sent “a clear message: national tax authorities cannot give any company, however large or powerful, an unfair competitive advantage compared to others”. As well as ongoing investigations into Apple’s affairs in Ireland and Amazon’s deal with Luxembourg, she said: “More cases may come, if we have indications that EU state aid rules are not being complied with.”

However, she added that state aid investigations were “just one part of a wider package that needs to come together to effectively address corporate tax avoidance”.

Greater tax coordination between member states was necessary to eliminate loopholes and the mismatches between national tax systems that were being routinely exploited by multinationals, she said.

Proposals for such coordination were set out by the European commissioner for tax, Pierre Moscovici, in June, but are deeply unpopular with several governments. Countries such as the UK and Ireland have seen their economies strengthen as they have offered increasingly more generous tax breaks to global companies prepared to invest locally and create jobs. As a result they have made clear they will not be part of commission plans for greater tax coordination.

