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  • Tag Archive: CJEU

    1. CJEU AG Deems Spain’s Regional Hydrocarbon Tax Non-Compliant

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      CJEU AG Deems Spain’s Regional Hydrocarbon Tax Non-Compliant – Introduction

      The Court of Justice of the European Union (CJEU) Advocate General, Athanasios Rantos, has delivered an opinion suggesting that Spain’s regional variation of the Special Tax on Hydrocarbons (STH), effective between 2013 and 2018, contradicts the EU Energy Taxation Directive.

      This position could significantly influence the forthcoming CJEU judgment, potentially impacting how energy products are taxed across regions within Member States.

      Background of the Special Tax on Hydrocarbons

      The STH, an excise duty levied on mineral oil products’ transfer to purchasers, is aimed at taxing the ownership transfer from tax warehouse holders to buyers.

      This duty, while ensuring tax collection from the purchaser by the warehouse holder, prohibits the latter from transferring the tax burden to customers, albeit allowing its consideration in product pricing.

      Governed by the Law 38/1992 on excise duties, the STH’s harmonization with EU law, specifically with Directive 2003/96/EC, is crucial for its legality.

      Controversy and Legal Challenge

      The introduction of an “Autonomous Community Tranche” allowing regions to apply supplementary tax brackets sparked legal debate, leading to varying tax levels across Spain based on purchase locations.

      Questions arose regarding the tranche’s alignment with Directive 2003/96, especially Article 5, which discusses tax bracket uniformity within Member States.

      Legal challenges ensued, prompting a referral to the CJEU for clarity on whether such regional tax brackets comply with EU directives.

      Advocate General’s Opinion

      Advocate General Rantos argued that Member States cannot implement regional excise duty variations without Council authorization, which Spain did not obtain.

      Emphasizing the internal market’s integrity and the free movement of goods, Rantos highlighted that differentiated tax tranches could fragment the market, opposing Directive 2003/96’s objectives.

      Furthermore, he noted that the Autonomous Community Tranche lacks a specific purpose, thereby not satisfying Directive 2008/118 conditions.

      The principle of equal treatment, according to Rantos, further invalidates the regional tax differences within Spain.

      Implications and Future Outlook

      Should the CJEU’s final decision align with the Advocate General’s opinion, it could echo the 2014 ruling against Spain’s “Céntimo Sanitario,” leading to the regional tax’s annulment.

      This outcome would necessitate a mechanism for affected taxpayers to claim refunds, considering the tax’s non-transferable nature and the need to demonstrate that the tax burden wasn’t passed on.

      CJEU AG Deems Spain’s Regional Hydrocarbon Tax Non-Compliant – Conclusion

      The CJEU’s forthcoming judgment and its retrospective effect could significantly influence Spain’s taxation landscape, potentially mandating refunds to taxpayers who bore the STH without lawful basis.

      As the legal community and taxpayers await the CJEU’s definitive ruling, the Advocate General’s stance marks a critical step towards resolving the dispute over Spain’s regional hydrocarbon taxation.

      Final thoughts

      If you have any queries about this article, or Spanish taxes in general, then please get in touch.

    2. CJEU Rules in Favour of Amazon and Luxembourg in State Aid Case

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      Amazon and Luxembourg state aid case – Introduction

      On 14 December 14, 2023, the Court of Justice of the European Union (CJEU) delivered an eagerly awaited judgment in favor of Amazon and Luxembourg, upholding the May 2021 decision of the General Court.

      This judgment dismissed the European Commission’s appeal, confirming that Amazon did not receive unlawful state aid from Luxembourg.

      The CJEU’s judgment is definitive and marks a significant moment in the ongoing discussions around state aid and tax rulings within the EU.

      The Facts

      The case centered around the arm’s length nature of a royalty paid by a Luxembourg operating company (LuxOpCo) to a Luxembourg partnership (LuxSCS).

      The payment was for the use of intangibles like technology, marketing-related intangibles, and customer data.

      In 2003, the Luxembourg tax authorities had confirmed the arm’s length nature of these deductible royalty payments, based on a transfer pricing analysis using the transactional net margin method (TNMM).

      European Commission’s Stance and General Court’s Judgment

      The European Commission had challenged this arrangement, arguing that LuxOpCo’s tax base was unduly reduced, effectively constituting state aid.

      However, the General Court identified factual and legal errors in the Commission’s analysis and annulled its decision, a position now affirmed by the CJEU.

      CJEU’s Judgment

      The CJEU agreed with the General Court’s conclusion but based its decision on different grounds.

      Echoing its approach in the Fiat judgment of November 2022, the CJEU held that the OECD transfer pricing guidelines could not be part of the “reference framework” for assessing normal taxation in Luxembourg.

      This is because Luxembourg law did not explicitly refer to these guidelines.

      Thus, the European Commission’s decision was fundamentally flawed.

      The CJEU concluded that even though the General Court had used an incorrect reference framework, its ultimate decision to annul the Commission’s decision was correct.

      The CJEU, therefore, chose to rule directly and confirm the annulment of the European Commission’s decision.

      Implications for Other Cases and Taxpayers

      This judgment aligns with previous rulings in the Fiat and ENGIE cases, underscoring that the European Commission cannot enforce non-binding OECD transfer pricing guidelines over national legal frameworks.

      However, these guidelines may still be relevant if they are explicitly referenced in national laws.

      The judgment also has implications for the pending appeal in the Apple case, which similarly involves intragroup profit allocation and the definition of the correct reference framework.

      Additionally, it influences other ongoing formal investigations, although details on these cases remain non-public.

      Amazon and Luxembourg state aid case – Conclusion

      The CJEU’s decision marks a crucial development in the landscape of EU state aid law, particularly concerning the application of transfer pricing rules and the boundaries of the European Commission’s powers.

      It highlights the importance of national legal frameworks in determining the arm’s length principle and sets a precedent for future cases involving similar issues.

      Final thoughts

      If you have any queries about this article on the Amazon and Luxembourg state aid case, or Luxembourg tax matters in general, then please get in touch.