In June 2014 the Commission initiated an investigation into the tax rulings issued by the Luxembourgish and Dutch national tax authorities related to the companies Fiat and Starbucks respectively . Tax rulings are comfort letters granted to a company specifying how its corporate tax will be calculated or how certain special tax provisions will be applied .
The Commission has considered that the particular tax rulings issued to these companies did not reflect the economic reality and used artificial and complex methods to calculate their taxable profit. In particular, this situation would result from taking into account transfer prices (i .e . those of good and services sold intra group) that do not correspond to market conditions .
As for the Fiat case, the Commission has found that the tax ruling issued in 2012 artificially lowered the taxes paid by Fiat Finance and Trade (based in Luxembourg) in the following manner: first, the capital base approximated was considerably lower than the actual capital due to a number of economically unjustifiable assumptions and downward adjustments. Second, the estimated remuneration applied to this lower capital for tax purposes was also lower than market rates .
With regard to Starbucks Manufacturing (located in The Netherlands), the Commission has considered that the tax ruling issued in 2008 artificially lowered the taxes paid by the company. First, Starbucks Manufacturing pays a considerably high royalty to another company within the Starbucks group based in the UK for roasting know-how, which allowed the company to unduly shift taxable profits. Second, Starbucks Manufacturing also pays an inflated price for green coffee beans to a Swiss subsidiary within the group .
Based on the above, the Commission has declared these tax advantages as State aids incompatible with the internal market and has ordered their recovery which is estimated in €20 to €30 million for each company .
