EU’s top court annuls Commission’s ruling for Fiat to pay €30mn in back taxes

The European Union’s top court on Tuesday overturned a decision requiring automaker Fiat Chrysler to pay up to €30 million in back taxes to Luxembourg.

The European Commission had ruled in 2015 that the 2012 tax ruling by Luxembourg authorities toward Fiat Chrysler Finance Europe, which provided treasury services and financing to the companies of the group established in Europe, was in breach of the bloc’s state aid rule.

The EU’s General Court, a constituent court of the Court of Justice of the European Union, had sided with the Commission in 2019 following appeals from both Luxembourg and Fiat Chrysler Finance Europe.

But the Court of Justice of the EU said on Tuesday that the commission failed to take into account the typical tax laws in Luxembourg when it was determining whether the automaker got a tax advantage and that the EU’s General Court “committed an error of law” in upholding that approach three years ago.

EU Competition Commissioner Margrethe Vestager said on Twitter that the ruling amounted to “a big loss for tax fairness.”

She added in a statement that the Commission “will carefully study the judgment and its implications” and welcomed the “important guidance on the application of EU State aid rules in the area of taxation” it provided. 

“The Court confirmed that action by Member States in areas that are not subject to harmonization by EU law is not excluded from the scope of the Treaty provisions on the monitoring of State aid.”

“The Commission is committed to continue using all the tools at its disposal to ensure that fair competition is not distorted in the Single Market through the grant by member states of illegal tax breaks to multinational companies,” she also said. 

The ruling comes as a proposal to roll out a minimum global corporate tax of 15% is being blocked at EU level by Hungary.

The proposal was signed last year by more than 130 countries representing more than 90% of global GDP and would apply to large companies with annual revenue exceeding €750 million.