IS YOUR TAX STRUCTURE STATE AID PROOF?
CONTENTS 1 2 3 4 5 6 What is EU State Aid? Do EU State Aid rules apply? Potential impact of EU State Aid rules What do you need to do? Meeting your needs DLA Piper network www.dlapier.com 03
CONTACTS Trade, Regulatory and Government Affairs Bob Martens Global Co-Leader International Trade, Regulatory and Government Affairs Brussels T +32 (0)2 500 15 03 F +32 (0)2 500 16 00 bob.martens@dlapiper.com Orestis Omran Counsel Litigation & Regulatory T +32 (0)2 500 15 39 F +32 (0)2 500 16 00 orestis.omran@dlapiper.com Transfer Pricing and Economic Services Randall Fox Co-Head International Transfer Pricing London T +44 (0)207 796 6928 F +44 (0)207 796 6666 randall.fox@dlapiper.com Joel Cooper Co-Head International Transfer Pricing London T +44 (0)207 796 6929 F +44 (0)207 796 6666 joel.cooper@dlapiper.com International Tax Pie Geelen Dutch Tax Advisor Head, European Tax Desk New York T +1 212 335 4905 F +1 212 884 8505 pie.geelen@dlapiper.com Roderik Bouwman Partner Co-Chair Global Tax Amsterdam T +31 (0)20 5419 894 F +31 (0)20 5419 941 roderik.bouwman@dlapiper.com 04 Is your tax structure state aid proof?
1 WHAT IS EU STATE AID? www.dlapier.com 05
WHAT IS EU STATE AID? European concept which may impact MNEs with operations in the EU To establish an EU internal market, State aid law has been created to avoid EU Member States engaging in a subsidy race favoring their national industries or attracting businesses to the detriment of other EU Member States EU State aid rules prohibit public authorities from granting selective advantages capable of distorting competition and affecting trade between EU Member States Some State aid measures may nevertheless be declared compatible with the internal market State aid measures can only be implemented after approval by the European Commission (EC), unless exempted by a specific regulation Likely to affect trade between Member States EU STATE AID Competition has been or may be distorted Intervention by the State and through State resources Economic advantage on a selective basis 06 Is your tax structure state aid proof?
WHAT IS EU STATE AID? Competition Commissioner Vestager s 2014 2019 priorities concerning State aid are tax investigations and the banking sector: tax breaks granted by certain EU Member States to multinationals (Aggressive tax planning) strict application of State aid rules by continuing the investigations started by the previous Commission stop any tax arrangements found to constitute unlawful State aid State Aid rules can cover tax arrangements entered into by MNEs with EU Member States The Commission has, to date, adopted 5 high profile decisions relating to tax rulings granted to MNEs and is requesting the EU Member States involved to pressure the recovery of several billion euros of unpaid taxes More than 1,000 tax rulings reviewed by the EC www.dlapier.com 07
2 DO EU STATE AID RULES APPLY? 08 Is your tax structure state aid proof?
DO EU STATE AID RULES APPLY? Tax Arrangements with EU Member States Tax rulings, including, excess profits rulings Other agreements with local tax authorities Unilateral Advance Pricing Agreements Audit settlement agreements Even if a tax arrangement complies with national law, it may still constitute unlawful State aid www.dlapier.com 09
3 POTENTIAL IMPACT OF EU STATE AID RULES 10 Is your tax structure state aid proof?
POTENTIAL IMPACT OF EU STATE AID RULES ACCOUNTING AND DISCLOSURE M&A INVESTMENTS DUE DILIGENCE BUSINESS OPERATIONS REPUTATION AND BRAND COMMISSION INVESTIGATION Materiality (including damages) Position Papers for uncertain tax positions in financial statements (e.g. FIN 48) Consideration of EU State aid risk during due diligence Review of existing business models Restructuring of transactions (planned) Economic substance (people, functions, and risks) Public perception if investigations are on-going or finalised Mainstream media coverage Reimbursement requested by national Courts Negative decision requiring payment of back-taxes and compound taxes, for up to 10 years No suspensive effect of an appeal www.dlapier.com 11
4 WHAT DO YOU NEED TO DO? 12 Is your tax structure state aid proof?
WHAT DO YOU NEED TO DO? Undertake a structured assessment of the impact of State aid on your business operations Analyse and disclose income tax risks for financial reporting purposes (e.g. FIN48 or similar) Consider solutions that will help you manage and mitigate State aid risk Plan for uncertainty and increased levels of controversy If the EC has already started to investigate, seek specialized State aid assistance www.dlapier.com 13
5 MEETING YOUR NEEDS 14 Is your tax structure state aid proof?
DLA PIPER STATE AID SERVICE OFFERING STATE AID ASSESSMENT (Privileged) opinion as to whether or not the existing or contemplated tax arrangements constitute unlawful EU State aid, including legal, economic, and financial analysis Quantification of exposure (where applicable) OTHER SERVICES Propose and implement restructurings to mitigate EU State aid risk EC investigation assistance, including legal comments to the EC supported by economic and financial analysis Representation before European courts supported by economic and financial analysis www.dlapier.com 15
6 DLA PIPER NETWORK 16 Is your tax structure state aid proof?
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