Extended Background

Automotive groups frequently tap favorable financial regimes within Europe, using group financing structures to optimize global funding costs. Fiat established a treasury center in Luxembourg, applying local TP rules to set intra-group lending rates—common practice before the EU’s broad state aid enforcement push.

Detailed Arguments

Taxpayer

• Relied on Luxembourg's national benchmarking regulations and statutory TP rules, open to any qualifying firm.

• Provided evidence that the rates applied to its intergroup loans were at arm's length by local standards.

Tax Authority (European Commission)

• Alleged Luxembourg conferred a selective advantage unavailable to other taxpayers, constituting unlawful state aid.

• Attempted to redefine the benchmark to a hypothetical standard stricter than what local rules required.

Court Reasoning

• Concluded there was no evidence of a privilege unique to Fiat; any company could employ the same structure and rates.

• Affirmed that national TP law is the primary line of defense—the EC must show actual selective advantage, not just policy disagreement.

Procedural Journey

• Proceeded through investigation and challenge by the European Commission, culminating in a favorable European Court of Justice (ECJ) decision for the taxpayer.

• All back tax claims and penalties were erased.

Implications Beyond the Case

• Affirmed legal certainty for any MNE using properly disclosed national TP rules within Europe.

• EU must meet a high bar for selectivity claims; mere disapproval of a country's rulebook is insufficient.

• Compliance tip: Meticulous local documentation and statutory compliance provide powerful shields against broader EU-level challenges.

Original Case Link:

ECJ Fiat Chrysler ruling (PDF)