European Commission notified about potentially unlawful tax breaks

02 Jun 2020 | 07:54 pm | 7 min. read

The European Commission has been notified about 385 tax breaks which may be unlawful under State aid rules over the last five years (as at year-end 31st March 2019), says Pinsent Masons, the international law firm.

  • Tax rulings that give some businesses an advantage could be deemed as State aid
  • Most notifications about potentially unlawful tax breaks are by France

The European Commission has been notified about 385 tax breaks which may be unlawful under State aid rules over the last five years (as at year-end 31st March 2019), says Pinsent Masons, the international law firm.

Over the last twelve months alone, the European Commission has received 51 notifications. There were only 80 notifications received by the Commission between 2007 – 2013.

Pinsent Masons says EU Member State governments have been reviewing more closely the tax treatment of multinational businesses in other Member States in recent years as they look to tackle corporate tax avoidance.

Both governments and businesses must notify the Commission when they believe a tax break or scheme is in existence that may provide an unfair advantage and infringes the EU State aid rules. Any interested party can also make a complaint to the Commission about alleged unlawful State aid by an EU Member State if they may be affected by the granting of the aid. Complainants will typically be those trying to compete with a business that has been granted aid.

The high number of notifications follows a number of high-profile investigations by the Commission that began in 2013 into certain tax rulings by EU Member States, in particular, in Ireland, Luxembourg and the Netherlands. The Commission argues that tax rulings that confer a selective advantage on specific businesses or are only available to specific types of business such as multinationals amount to State aid.

Since 2013, the Commission has investigated favourable tax treatment of multinational businesses such as Apple, Starbucks, Amazon, ENGIE, Fiat and McDonald's. In all cases, except McDonald's, the Commission found that unlawful State aid had been given and has demanded that Member States recoup the benefit of the State aid from the relevant taxpayers. In Apple's case, the unlawful aid which is required to  be repaid amounts to around 13 billion euros.

The Commission is still investigating whether State aid has been given by the Netherlands to Nike and IKEA and by Luxembourg to Huhtamäki.

In April 2019, the Commission ruled that the UK's Controlled Foreign Company (CFC) rules partly contravened EU State aid rules and that the UK must require repayment from companies that have benefited.

Research by Pinsent Masons shows the most notifications made to the Commission by Member States since 2007 are from France (51), followed by Czech Republic (37) and Poland (36). There have been 24 notifications by the UK government (see table below).

Pinsent Masons says that the high number of notifications by France may reflect the traditionally more interventionist nature of public authorities in that Member State which could result in some French companies receiving an advantage. The French government has equity positions in 81 French companies.  

Jason Collins, Partner and Head of Tax at Pinsent Masons, says: “Offering favourable tax treatment on a selective basis to multinational businesses has become an important method by which many countries attract inward investment. However, in this era of the war on tax avoidance this has become more controversial.”

“The European Commission has been taking a more aggressive stance towards possible anti-competitive behaviour and has the tax treatment of multinationals very much in its sights.”

“The complexities of the tax rules in some EU Member States will also likely have driven the increase in the number of notifications. Other factors, such as tax breaks provided to investments in a country’s overseas territories or to encourage investment in certain industries, could also count.”

Alan Davis, Partner and Head of Competition, EU & Trade at Pinsent Masons, said: "The Commission has made it clear that any UK tax rulings found to have infringed the State aid rules before the UK's exit from the EU will still require any unlawful State aid arising before that date to be repaid notwithstanding Brexit."

"After Brexit, the position becomes less clear. On the one hand, the UK will have a domestic UK State aid regime that will be enforced by the Competition and Markets Authority and which may regulate these tax rulings at a domestic level.  But EU State aid law will no longer apply in the UK, so UK businesses will no longer be able to complain to the Commission about new and potentially unlawful tax schemes in other EU Member States."



 Member state

Number of "tax advantage or tax aid" notifications received since 2007


 France 51


 Czech Republic 37


 Poland 36


Italy 31


Germany 26


UK 24


Sweden 21


Netherlands 15


Hungary 14


Malta 13

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Alan Davis

Alan Davis

Partner, Head of Competition, EU & Trade

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