Fiat wins tax case against EU after Ireland-backed appeal

Irish-backed automaker Fiat Chrysler has overturned an EU order to pay Luxembourg €30 million in back taxes.

The European Court of Justice, the EU’s highest court, said the order was based on rules that were not part of Luxembourg law at the time and that the European Commission made “a mistake” in claiming Fiat had a tax advantage.

The court also ordered the Commission to pay Ireland’s appeal costs.

Tuesday’s decision overturns a 2019 ruling by the bloc’s second highest court and overturns the Commission’s 2015 finding that Luxembourg provided illegal state aid to the automaker.

Ireland, which joined Luxembourg and Fiat to appeal the decision in 2016, claimed during the case that the European Commission was involved in “disguised tax harmonisation”.

Irish government lawyers also argued that the Commission’s case was based on a “hypothetical tax system” that did not exist in Luxembourg at the time.

Commission vice-president and competition chief Margrethe Vestager – who initiated the original case – said on Twitter it was a “huge loss for tax justice”.

“The Commission is committed to continue to use all the tools at its disposal to ensure that the financial assistance does not distort fair competition in the internal market[ing] by member states of illegal tax breaks for multinational companies,” she said in a written statement.

She also highlighted the court’s finding that a tax treaty can still constitute state aid, even if based on laws outside the EU’s jurisdiction.

In 2015, following an investigation, the Commission alleged that a Luxembourg-based subsidiary of Fiat was able to artificially lower its tax burden by reallocating funds between different companies in the group.

Smaller or standalone companies are not in a position to do the same and therefore grant Fiat a “selective advantage”. However, Luxembourg said its tax legislation does not allow for such comparisons.

The Fiat case was among a series of similar judgments made at the time, including an ongoing dispute over €13 billion in back taxes that tech giant Apple owes Ireland, according to the Commission.

In 2020, the EU’s second highest court overturned the Commission’s finding, which the EU executive is appealing. A verdict in this case is expected shortly.

Ms Vestager also examines the Dutch tax treatment of Swedish furniture maker Ikea and sportswear brand Nike, as well as a series of 39 tax deals Belgium has with various multinationals. Fiat wins tax case against EU after Ireland-backed appeal

Fry Electronics Team

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