The European Commission on December 19 invited interested parties to comment on its investigation into whether an advance pricing agreement (APA) granted by the Netherlands to a Starbucks subsidiary constitutes illegal state aid.
The Commission said it currently believes that a 2008 APA issued by Dutch tax authorities set too low of an arm’s length remuneration for Starbucks’ coffee roasting operations in the Netherlands, and that therefore the tax ruling constitutes illegal state aid under Article 107(1) of the Treaty on the Functioning of the European Union.
The Commission maintains that the Dutch tax authorities should not have accepted the assertion that Starbucks Manufacturing BV operates as a low risk manufacturer. The ruling also tolerates questionable adjustments which should have been rejected, and permits tax deductible royalty payments to a related entity that are not linked to the value of the related intellectual property, the Commission said.
If it is determined that the tax arrangements constitute state aid, Starbucks may be required to pay back the aid to The Netherlands.
Comments should be submitted by January 19. 2015.
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