The Netherlands I: Fiscal Unity, Groupe Steria’s Per-Element Approach and Currency Losses relating to a Non-Resident Subsidiary (C-399/16[X NV]); Starbucks and State Aid (T-760/15 and T-636/16)

In this contribution, the author discusses three cases. The first case, Case C- 399/16 (X NV) is a case which has been inspired by the Groupe Steria decision. The main issue in Case C-399/16 (X NV) is whether the Groupe Steria decision implies that a Dutch resident parent company cannot be denied the right to take into account currency losses in respect of a UK resident subsidiary. The Netherlands has denied this right on the basis of the Dutch participation exemption. The possible inconsistency with EU law has been founded on the idea that a Dutch resident parent company could have taken into account currency losses if the UK resident subsidiary had been a Dutch resident subsidiary with a permanent establishment (PE) in the UK and that subsidiary had been included in a fiscal unity with its Dutch resident parent company. Can this single element of the Dutch fiscal unity regime be relied on because of the Groupe Steria decision? This per-element approach may be relevant not only for the Netherlands, but for all EU Member States and EEA Member States which have a group taxation regime. The two other cases to be discussed, T-760/15 (The Netherlands v. Commission) and T-636/16 (Starbucks and Starbucks Manufacturing Emea v Commission), concern the European Commission decision that Starbucks received forbidden State aid from the Netherlands through an advanced pricing agreement (APA) concluded between Starbucks and the Dutch Tax Authorities (DTA). Both the Netherlands (Case T-760/15) and Starbucks (Case T-636/16) have appealed the decision. The European Commission is very active in the field of taxation of MNEs and potential State aid. In the Starbucks case the arm’s length pricing is at stake, but the Commission is also active in respect of other fields. Sometimes the fields are closely related, such as in the Apple case which concerns the allocation of profits between head office and PE. However, mismatches are also under investigation, such as the mismatch of the PE concept under the US-Luxembourg tax treaty leading to double non-taxation in the McDonald’s case. The Starbucks case may also be relevant for all EU and EEA Member States, because APA practices are widely applied by the Member States. This contribution starts by discussing Case C-399/16 (X NV) which is followed with a discussion of the Starbucks cases. For each of the cases, an initial description of the facts is provided. Subsequently, domestic tax law and tax treaty law are addressed. Next, the considerations of the Hoge Raad (HR; Dutch Supreme Court) and the Commission are set out respectively. Thereafter, the focus is on the preliminary questions of the HR and the pleas in law and main arguments in the Starbucks cases. Potential answers to the questions raised are then provided along with comments on the positions taken by the EC, the Netherlands and Starbucks from the author’s personal perspective. These potential answers and comments are not be given in isolation, rather they are based on benchmarks. The contribution is closed by summarizing the author’s main conclusions