Fiat Finance vs Luxembourg: CASE SUMMARY
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Fiat Finance vs Luxembourg: CASE SUMMARY
Case Information:
- Court: European Court of Justice (Grand Chamber)
- Case No: Joined Cases C-885/19 P and C-898/19 P
- Applicant: Fiat Chrysler Finance Europe; Ireland
- Defendant: European Commission
- Judgment Date: 8 November 2022
- Download the FULL JUDGMENT
Judgment Summary
The case involves two appeals by Fiat Chrysler Finance Europe (formerly Fiat Finance and Trade Ltd) and Ireland, challenging the General Court’s decision to uphold a European Commission ruling that a tax ruling granted by Luxembourg to Fiat Chrysler Finance Europe constituted unlawful state aid. The Commission had determined that the tax ruling issued by Luxembourg gave Fiat Chrysler Finance Europe a selective tax advantage, breaching EU state aid rules under Article 107(1) of the Treaty on the Functioning of the European Union (TFEU).
The tax ruling, granted by Luxembourg in 2012, allowed Fiat to calculate its taxable income in Luxembourg based on intra-group transactions using transfer pricing methods. The European Commission found that the method approved by Luxembourg led to an unjustified reduction in Fiat’s tax burden, thus giving it an economic advantage not available to other companies. This selective treatment was considered incompatible with the internal market.
The General Court upheld the Commission’s findings, concluding that Luxembourg had not correctly applied the arm’s length principle in its tax ruling. The core of the dispute was whether Luxembourg’s tax ruling resulted in a deviation from market-based pricing for intra-group transactions.
Fiat Chrysler Finance Europe and Ireland appealed the General Court’s judgment, arguing that the arm’s length principle applied by the Commission was not part of Luxembourg national tax law. They also claimed that the Commission’s decision amounted to a form of tax harmonization by the EU, violating the fiscal autonomy of Member States. However, the European Court of Justice rejected these arguments, affirming that the arm’s length principle was a legitimate benchmark for assessing state aid under Article 107(1) TFEU, even if not explicitly codified in national law.
In the end, the ECJ upheld the General Court’s decision, reaffirming the Commission’s assessment that Luxembourg’s tax ruling conferred a selective advantage to Fiat Chrysler Finance Europe and that the aid granted was unlawful. Consequently, Luxembourg was required to recover the aid from Fiat Chrysler.
