The EU General Court delivers two judgments clarifying how State aid rules apply to national tax rulings and determines whether a transfer pricing ruling in respect of intra-group transactions confers a selective advantage under the State aid rules (Fiat / Starbucks)

On 24 September 2019, the General Court (the ‘Court’) upheld the European Commission's (the ‘Commission’) ruling ordering Luxembourg to recover EUR 23.1 million from Fiat Chrysler Finance Europe (‘FFT') [1] and annulled the Commission's ruling ordering the Netherlands to recover EUR 25.7 million from Starbucks. The Court confirmed that: Even if direct taxation falls within the competence of the Member States of the European Union, the Commission could assess whether the national tax rulings were consistent with the EU state aid rules. [2] This was not backdoor fiscal harmonization. The Commission is permitted to use the arm's length principle as a tool to assess whether the transactions that were the subject of the rulings were remunerated as though they had been negotiated at arm’s