Anti-avoidance Measures and State Aid in a Post-BEPS Context: An Attempt at Reconciliation

Abstract

From an EU law perspective, anti-avoidance measures adopted by Member States have long been subject of scrutiny of the CJEU under EU fundamental freedoms (See also the judgment in Test Claimants in the Thin Cap Group Litigation v Commissioners of Inland Revenue, Case C-524/04, ECLI:EU:C:2007:161, paragraph 25; judgment in Lankhost-Hohorst, C-324/00, ECLI:EU:C:2002:749; judgment in Lasertec, C-492/04, ECLI:EU:C:2007:273; judgment in NV Lammers & Van Cleeff, C-105/07, ECLI:EU:C:2008:24; judgment in Itelcar—Automoveis, C-282/12, ECLI:EU:C:2013:629). This article focuses on the treatment of anti-tax avoidance measures under EU State aid law in the light of current international developments as regards fight against base erosion and profit shifting. Anti-tax avoidance measures indeed often contain rather open-ended notions and entail distinctions based on criteria relating to economic substance, which leads to a wide margin of appreciation by tax authorities. Therefore, they are likely to be caught by the prohibition of State aid. After a brief introduction on the principles guiding the application of State aid rules to fiscal measures, a typology of anti-avoidance measures adopted by the EU and its Member States according to their source, scope and their effects is provided. Then, the article discusses the most significant case-law on the topic, i.e. the Finnish P Oy and German Sanierungsklausel cases and their consequence on the current approach taken by EU institutions in the fight against purely tax driven arrangements. Finally, it proposes interpretative tools to reconcile state aid enforcement with substance-based anti-avoidance measures, in particular as regards the definition of the reference framework, the selection of the main objective of the tax measure at stake and the assessment of the genuine character of economic activities.