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EU's General Court annuls EC State aid decision in Starbucks

September 2019


The General Court of the European Union (GC) rendered its judgment (T-760/15 and T-636/16) on September 24, 2019, regarding the action brought by Starbucks Corp., Starbucks Manufacturing EMEA BV (SMBV), and the Netherlands to annul the European Commission’s (EC) final State aid decision of October 21, 2015 (SA.38374). The GC annulled the EC’s decision because the EC did not demonstrate the existence of an economic advantage within the meaning of EU State aid rules.

The takeaway

The GC appeared to agree with the EC that the ALP was not necessarily synonymous with Art 9 of the OECD model convention, but it also indicated that the OECD TP guidelines are a useful and relevant aid for applying the ALP. It further acknowledged that TP by its very nature involves a degree of approximation. Accordingly, Member States are to be afforded a margin of discretion. It remains to be seen how far this extends and whether this judgment will be appealed to the European Court of Justice. 

The Dutch State Secretary of Finance responded to the present judgment, stating that in his opinion this means that the DTA did not treat Starbucks any differently or more favorably than other companies. Additionally, Commissioner Margrethe Vestager commented that the judgment gives important guidance on the application of EU State aid rules in the area of taxation and confirms that, while Member States have exclusive competence in determining their laws concerning direct taxation, they must do so in respect of EU law, including State aid rules.

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Doug McHoney

International Tax Services Co-Leader, PwC US

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