Luxembourg to appeal EU tax dodging fine on Fiat

The McDonald’s case is the third to focus on Luxembourg, adding to the Fiat case and an ongoing probe into tax rulings obtained by Amazon.com Inc.

It’s the first challenge to reach the EU courts since the European Commission’s precedent-setting decisions in October that the Italian carmaker and Starbucks Corp. benefited from favorable tax deals by Luxembourg and the Netherlands.

“The commission has used unprecedented criteria in establishing the alleged state aid, thus putting into jeopardy the principle of legal certainty”, Luxembourg’s government said on Friday.

“Luxembourg is strongly committed to tax transparency and the fight against harmful tax avoidance”, it added.

“A tax ruling that agrees to McDonald’s paying no tax on their European royalties either in Luxembourg or in the USA has to be looked at very carefully under EU state aid rules”, European Competition Commissioner Margrethe Vestager said.

The Ministry of Finance in Luxembourg said it believed that McDonald’s had not been given any special tax treatment or selective advantage.

Months after trade unions accused the company of avoiding more than €1bn in taxes across Europe, the EU said it suspected Luxembourg had broken state-aid rules since 2009 by allowing a McDonald’s unit to escape taxes in the nation and across the Atlantic by misusing a double-taxation accord.

Multinationals in Europe pay taxes in the country where they have their regional headquarters, and countries have long competed to lure the big companies with incentives.

According to the Commission, the March 2009 tax ruling confirmed that the company was not due to pay corporate tax in Luxembourg on the grounds that the profits were subject to US tax under the Luxembourg-US double taxation treaty.

“We are subject to the same tax laws as other companies and are confident that the inquiry will be resolved favorably”, the statement said.

Luxembourg’s legislature said it would “completely collaborate” with the examination, and that it “considers that no exceptional expense treatment nor particular point of preference have been conceded to McDonald’s”. It said: “As a result, the Luxembourg authorities recognized the McDonald’s Europe Franchising’s United States branch as the place where most of their profits should be taxed, whilst USA tax authorities did not recognize it. The Luxembourg authorities therefore exempted the profits from taxation in Luxembourg, despite knowing that they in fact were not subject to tax in the U.S.”.

“Any suggestion that we are specifically targeting USA companies is unfounded and untrue”.