On 8 November 2022, the Court of Justice of the European Union (CJEU) issued a long-awaited (landmark) decision in the Fiat-Chrysler state aid case. The CJEU set aside the judgement of the General Court of the European Union (General Court). It annulled the decision (the Decision) of the European Commission (EC) that Luxembourg had granted unlawful state aid to Fiat-Chrysler Finance Europe (FFE), through the provision of a tax ruling (the Tax Ruling).
FFE (a Luxembourg subsidiary of the Fiat-Chrysler group) provided intra-group financing and treasury services to group entities. To determine an arm’s-length remuneration for FFE, a transfer pricing analysis based on the OECD TP Guidelines was prepared. In order to obtain certainty in advance, FFE concluded the Tax Ruling with the Luxembourg tax authorities. The Tax Ruling confirmed the arm’s-length nature of the remuneration as determined by the transfer pricing analysis.
At the time when FFE and Luxembourg tax authorities concluded the Tax Ruling, there was no explicit reference to the arm’s length principle in Luxembourg’s national tax system. Therefore, both FFE and the Luxembourg tax authorities relied on the guidance provided in the OECD TP Guidelines.
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