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A New Framework for State Aid Review of Tax Rulings

Pierpaolo Rossi-Maccanico

In line with its commitment to use State aid rules in accompanying Member States’ coordinated action responding to harmful tax competition internationally, the Commission has recently opened a new wave of State aid proceedings to review Member States' preferential tax regimes for multinational undertakings (MNE). Four proceedings concern individual tax rulings, going under the name of Advanced Pricing Agreements (APAs) and appear to be at variance with the existing theories justifying the power of tax administrations to make the appropriate corrections to the declared value of cross border transactions between related entities within the same MNE (transfer pricing). The article considers that SA reviews of individual APAs cast legal uncertainty on a large number of tax assessments, and accordingly a new procedural framework is required to restore legal certainty to an area of State aid control, which puts into question the proper implementation of the transfer-pricing rules by Member States. If it wants to get serious on its commitment to bring fairness in cross border taxation of MNEs, the Commission should adopt a framework for individual tax rulings to help Member States in fulfilling their obligations about advance notification to the Commission of potential fiscal aids. To this effect, Article 106(3) TFEU provides the Commission with a special legislative empowerment designed to clarify Member States' obligations, when these are granting special tax rights to private undertakings, as the author argues is the case for APAs granted to MNEs.
Keywords: Notion of Aid, Imputability, Advantage, Selectivity


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