On 24 September 2019, the EU General Court upheld the Commission’s decision that Fiat received unlawful State aid from Luxembourg, and at the same time cancelled the decision which had found the same with respect to Starbucks in the Netherlands.

On 3 September 2012, the Luxembourg tax authorities issued a tax ruling in favor of Fiat Chrysler Finance Europe (‘FFT’), an undertaking in the Fiat group that provided treasury and financing services to the group companies established in Europe. The tax ruling at issue endorsed a method for determining FFT’s remuneration for these services, which enabled FFT to determine its taxable profit on a yearly basis for corporate income tax in the Grand Duchy of Luxembourg.

On 21 October 2015, the Commission had decided that the state aid and that it was operating aid that was incompatible with the internal market. The EC also found Luxembourg had failed to notify it of the proposed tax ruling and had not complied with the “standstill obligation.” The EC found that Luxembourg was required to recover the unlawful and incompatible aid from FFT.

Then, Luxembourg and FFT each brought an action before the General Court for annulment of the EC’s decision. Their claims were based in part on the EC’s finding that the tax ruling conferred an advantage and that it did not comply with the arm’s length principle.

Finally, on 24 September 2019, the General Court ruled in favor of the EC in that it dismissed the actions brought by both Luxembourg and FFT, and confirmed the validity of the Commission’s decision. According to the Court, the European Commission did not engage in any tax harmonization in disguise. Here also, the Court ruled that the European Commission was entitled to analyses the tax ruling in the light of the arm’s length principle and, moreover, that the European Commission was correct in that the arrangements for the application of the transactional net margin method (TNMM) included in the tax ruling were incorrect. Additionally, on the selectivity criterion, the Court concluded that the Commission did not make a mistake in finding that the advantage conferred on FFT by the tax ruling at issue was indeed selective, since the conditions attached to the presumption of selectivity were fulfilled in this case. Furthermore it rejected the pleas to the effect that the European Commission failed to establish that there was a restriction of competition. Lastly, the Court concluded that the recovery of the aid does not breach the principle of legal certainty.