Fiat Fights EU’s ‘Absurd’ $37 Million Luxembourg Tax Bill

Fiat Chrysler Automobiles NV told the European Union’s top court that a 30 million-euro ($37 million) tax bill from regulators was “absurd” and sowed confusion between national authorities.

The European Commission claimed that Luxembourg was too lax on a Fiat unit in the Grand Duchy, while the Italian tax authority “is claiming precisely the contrary,” Guglielmo Maisto, a lawyer for the company, told the EU Court of Justice in a hearing on Monday.

Fiat is challenging a 2015 EU order to pay 30 million euros in back taxes over its Luxembourg fiscal deals. Ireland, which last year successfully overturned a record 13 billion-euro tax bill for Apple Inc., lent its support from the start and is also appealing a first court defeat in 2019.

It’s led to a situation where “no one knows what rules they should be applying” anymore, Denis Waelbroeck, a lawyer for Luxembourg, told the 13-judge panel.

The final decision in Monday’s case could affect the pace of other commission probes, which have already got bogged down by critical rulings from EU judges.

A lower EU tribunal will issue two rulings later this week, on Inc.’s challenge against a 250 million-euro tax bill and Engie SA’s appeal of a 120 million-euros levy.

At issue in the Fiat case is the EU’s interpretation of the so-called arm’s length principle, which for tax purposes is meant to ensure that transactions between subsidiaries are based on prices an unrelated company would pay.

“The commission’s decision establishes that Luxembourg allowed Fiat to reduce the tax its Luxembourg subsidiary paid by a factor of at least 10 as compared to comparable independent companies” based on a “fundamentally unsound” method, commission lawyer Paul-John Loewenthal said.

Luxembourg has made changes to its rules in the meantime, which convinced the Brussels-based commission in September 2018 to close a separate investigation into tax rulings for McDonald’s Corp.

The cases are: C-885/19 P, Fiat Chrysler Finance Europe v. Commission, C-898/19 P, Ireland v. Commission and Others.

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