Share

FCA loses the appeal to the EU Court: it will have to pay 30 million

The European court agreed with the European Antitrust that it had considered the tax ruling applied in Luxembourg as state aid. FCA says she is disappointed and studies the next steps

FCA loses the appeal to the EU Court: it will have to pay 30 million

The EU Court confirmed the decision of the European Commission concerning the aid measures decided by Luxembourg in favor of Fiat Chrysler Finance Europe. It's about the tax ruling which allowed the company to determine annually the profits taxable under corporation tax in the Grand Duchy. Four years ago, the Commission considered the measures to be illegal state aid, for which Luxembourg was forced to recover the amount of the aid from Fiat Crysler Finance Europe. The Court therefore agreed with the Antitrust, rejecting the appeals of Fiat Chrysler Finance Europe and the Grand Duchy. Fiat Chrysler Finance Europe, through its spokesman, said it was disappointed by the judgment of the EU Court and "is considering the next steps to take on the matter".

The decision, which rewards the European Antitrust, brought the share down and at 13 pm it lost 44% in Piazza Affari.

 Going into more detail, the EU Court indicated that the Commission "did not proceed with any tax harmonization but exercised the competence provided for by EU law by verifying that the advance tax decision conferred an advantage in relation to normal taxation". In particular, the magistrates observe that "the prices of intra-group transactions are not determined under market conditions" and that the arm's length principle "constitutes a useful tool which makes it possible to check whether those transactions are remunerated as if they had been negotiated between independent companies ”. Hence the legitimacy of the Commission's approach to ascertain whether the price level for intra-group transactions validated by the Grand Duchy of Luxembourg corresponds to the price that would have been negotiated under market conditions.

The Court held that the Commission rightly considered that the methods of applying the net margin method validated by tax ruling were wrong: in particular that the entire equity capital of the company should have been taken into account and that a single rate should have been applied. Furthermore, the Commission was correct in considering that the method followed to include Fft's hypothetical regulatory capital and to exclude Fft's stakes in Fiat Finance North America and Fiat Finance Canada from the amount of capital to be remunerated "did not allow to a result of full competition".

Hence the observation that "the method introduced by the advance tax decision has minimized the remuneration of Fft on the basis of which the tax due is determined". And the conclusion that all this has given Fft "an advantage because it entailed a decrease in the tax burden".

comments