COMMISSION DECISION (EU) 2016/2326
of 21 October 2015
on State aid SA.38375 (2014/C ex 2014/NN) which Luxembourg granted to Fiat
(notified under document C(2015) 7152)
(Only the French text is authentic)
(Text with EEA relevance)
1.
PROCEDURE
2.
DESCRIPTION OF THE AID MEASURE
2.1.
Description of the beneficiary
Main cross-border Intra-group transactions
2.2.
The contested tax ruling
2.2.1.
The FFT APA
2.2.2.
The transfer pricing report
(in EUR thousand) |
|
Minimum capital requirement |
2011 |
Operational risk |
938 |
Counterparty risk |
2 603 |
Exchange rate risk |
0 |
Credit risk |
24 982 |
Minimum capital required by Basel II framework |
28 523 |
(in EUR thousand) |
|
FFT equity breakdown by the tax advisor |
Equity 2011 |
Minimum equity at risk |
28 523 |
Equity supporting the financial investments in FFNA and FFC |
165 244 |
Equity backing the functions performed |
93 710 |
Total Equity |
287 477 |
Company Name |
Beta |
ING Groep NV (EXTAM:INGA) |
3,00 |
UBS AG (SWX:UBSN) |
1,80 |
Wüstenrot & Württembergische AG (XTRA:WUW) |
0,41 |
Deutsche Börse AG (XTRA:DB1) |
1,28 |
Oslo Bors VPS Holding ASA (OTCNO:OSLO) |
0,13 |
London Stock Exchange Group (LSE:LSE) |
1,24 |
Fimalac SA (ENXTPA:FIM) |
0,68 |
International Personal FinancePlc (LSE:IPF) |
1,92 |
GrenkeLeasing AG (XTRA:GLJ) |
0,55 |
Mittel SpA (CM:MIT) |
0,93 |
GlobeOp Financial Services SA (LSE:GO) |
0,56 |
KBC Ancora (ENXTBR:KBCA) |
3,61 |
Aktiv Kapital ASA (OB:AIK) |
0,25 |
IG Group Holdings Plc (LSE:IGG) |
0,75 |
IFG Group plc (LSE: IFP) |
1,11 |
Conafi Prestito SpA (CM:CNP) |
0,74 |
NEOVIA Financial Plc (AIM:NEC) |
0,60 |
H&T Group Plc (AIM:HAT) |
– 0,11 |
Hesse Newman Capital AG (XTRA:RTM) |
0,29 |
Acta Holding ASA (OB:ACTA) |
1,70 |
Manx Financial Group PLC (AIM:MFX) |
0,30 |
PLUS Markets Group plc (AIM:PMK) |
– 0,05 |
Law Debenture Corp. Plc (LSE:LVVDB) |
0,95 |
Hypoport AG (DB:HYQ) |
0,70 |
Perrot Duval Holding SA (SWX:PEDP) |
0,16 |
Albemarie & Bond Holdings plc (AIM:ABM) |
0,21 |
MCB Finance Group plc (AIM:MCRB) |
NA |
Brightside Group plc (AIM:BRT) |
0,11 |
DF Deutsche Forfait AG (DB:DE6) |
0,83 |
Autobank AG (DB:AW2) |
NA |
Ambrian capital plc (AIM:AMBR) |
0,83 |
Gruppo MutuiOnline S.p.A (CM:MOL) |
0,77 |
Park Group plc (AIM:PKG) |
0,09 |
OVB Holding AG (XTRA:O4B) |
– 0,19 |
Albis Leasing AG (DB:ALG) |
0,57 |
Hellenic Exchanges SA (ATSE:EXAE) |
1,42 |
FORIS AG (XTRA:FRS) |
0,20 |
Creon Corporation Plc (AIM:CRO) |
2,03 |
Investeringsselskabet Luxor A/S (CPSE:LUXOR B) |
0,50 |
Univerma AG |
NA |
OFL AnlagenLeasing AG (DB:OFL) |
0,86 |
Ideal GroupSA (ATSE:INTEK) |
NA |
Nøtterø SpareBank (OB:NTSG) |
0,20 |
Apulia Prontoprestitio SpA (CM:APP) |
1,07 |
Ultimate Finance Group plc (AIM:UFG) |
0,54 |
Dresdner Factoring AG (XTRA:D2F) |
0,42 |
Heidelberger Beteiligungsholding AG (DB:IPO) |
0,14 |
ABC Arbitrage SA (ENXTPA:ABCA) |
0,48 |
Baydonhill plc (AIM:BHL) |
0,04 |
London Capital Group Holdings plc (AIM:LCG) |
0,72 |
Imarex ASA (OB:IMAREX) |
0,48 |
Toscana Finanza SpA (CM:TF) |
0,49 |
Banca Finnat Euramerica SpA (CM:BFE) |
0,79 |
S&U plc (LSE:SUS) |
0,27 |
Bolsas y Mercados Españoles SA(CATS:BME) |
0,97 |
Banca IFIS SpA (CM:IF) |
0,69 |
Paris Orleans SA (ENXTPA:PAOR) |
0,60 |
SNS Reaal NV (ENXTAM:SR) |
2,37 |
Close Brothers Group plc (LSE:CBG) |
0,94 |
Provident Fiancial plc (LSE:PFG) |
0,35 |
Pohola Bank plc (HLSE:POH1S) |
1,43 |
Investec plc (LSE:INVP) |
1,73 |
Banque Nationale de Belgique SA (ENXTBR:BNB) |
0,49 |
Credit Suisse Group (SWX:CSGN) |
1,43 |
Deutsche Bank AG (DB:DBK) |
1,98 |
Schweizerische Nationalbank (SWX:SNBN) |
0,22 |
Source: Damodaran |
Arm's length range |
Beta |
Number of companies |
66 |
MAX |
3,61 |
90 Percentile |
1,79 |
75 Percentile |
1,04 |
Median |
0,64 |
25 Percentile |
0,29 |
10 Percentile |
0,13 |
MIN |
0,19 |
(in EUR thousand) |
|
Capital remuneration |
EBT 2011 |
Risk remuneration |
1 726 |
Functions remuneration |
816 |
Remuneration of equity supporting participations in FFNA and FFC(31) |
0 |
Total EBT |
2 542 |
Minimum Capital Requirement |
FFT |
|
||||||||||||||||||
|
2011 |
|
||||||||||||||||||
(amounts in EUR thousand) |
|
|||||||||||||||||||
Operational Risk |
938 |
a |
||||||||||||||||||
Counterpart Risk |
2 603 |
b |
||||||||||||||||||
Exchange rate Risk |
0 |
c |
||||||||||||||||||
Credit Risk |
24 982 |
d |
||||||||||||||||||
Minimum Capital Requirement |
28 523 |
e = a + b + c + d |
||||||||||||||||||
Capital offset by participation interest |
165 244 |
x |
||||||||||||||||||
Excess Capital |
93 710 |
f = g – e – x |
||||||||||||||||||
Equity |
287 477 |
g |
||||||||||||||||||
Net Profit Indicator |
|
|
||||||||||||||||||
Expected return on capital |
6,05 % |
h |
||||||||||||||||||
Short-term interest rate |
0,87 % |
i |
||||||||||||||||||
Capital remuneration |
|
|
||||||||||||||||||
Risk remuneration |
1 726 |
k = h * e |
||||||||||||||||||
Functions remuneration |
816 |
j = i * f |
||||||||||||||||||
Total EBT (Earnings before tax) |
2 542 |
l = k + j |
||||||||||||||||||
To be noted: the main assumption is that there is no credit/counterparty risk on operations with Group companies |
2.3.
Description of the Luxembourg rules on transfer pricing
2.3.1.
Article 164 of the Luxembourg Income Tax Code
2.3.2.
Circular L.I.R. No 164/2
2.4.
Description of the OECD guidance on transfer pricing
2.5.
Additional information submitted after the opening of the formal investigation procedure
2.5.1.
Luxembourg's Letter of 3 September 2014
2.5.2.
Luxembourg's Letter of 24 March 2015
(in EUR) |
|
2009 |
2 643 424 |
2010 |
2 424 869 |
2011 |
2 600 416 |
2012 |
1 684 103 |
2013 |
2 095 969 |
2.5.3.
Fiat's Submission of 31 March 2015
2.5.3.1.
Information on Fiat group companies in direct relation with FFT
(in EUR thousand) |
||||
|
2010 |
2011 |
2012 |
2013 |
|
|
|
|
|
Interest and similar income |
613 561 |
650 641 |
664 707 |
736 561 |
Thereof from group companies |
605 880 |
626 806 |
648 497 |
731 462 |
Other income |
72 292 |
76 910 |
29 185 |
10 125 |
TOTAL INCOME |
685 853 |
727 551 |
693 892 |
746 686 |
|
|
|
|
|
Operating expense and amortisation |
3 419 |
3 655 |
2 926 |
2 499 |
Interest payable and other financial charges |
625 078 |
640 207 |
631 854 |
666 246 |
Thereof to group companies |
59 409 |
55 520 |
38 041 |
20 268 |
Thereof on bonds and other notes |
551 229 |
574 561 |
592 099 |
643 853 |
Commission on Guarantees on bonds paid to Fiat SpA(53) |
3 161 |
2 851 |
2 702 |
3 006 |
Other expense |
51 709 |
78 211 |
54 702 |
72 805 |
TOTAL EXPENSE (excl. corporate tax) |
683 367 |
724 924 |
692 185 |
745 032 |
Profit before corporate tax |
2 485 |
2 627 |
1 707 |
1 652 |
Tax |
748 |
776 |
491 |
508 |
Net profit |
1 737 |
1 851 |
1 217 |
1 146 |
|
|
|
|
|
Shareholders' equity |
285 625 |
287 477 |
288 693 |
289 839 |
Amounts owned to group companies |
4 354 692 |
2 275 578 |
1 530 146 |
1 661 930 |
Debt securities issued |
7 716 844 |
7 746 301 |
9 116 345 |
11 030 180 |
Other liabilities (bank debt, accruals, …) |
2 470 513 |
446 444 |
144 671 |
158 865 |
TOTAL LIABILITIES AND EQUITY |
14 827 674 |
10 755 800 |
11 079 855 |
13 140 814 |
|
|
|
|
|
Amounts owned by group companies |
11 869 312 |
7 387 279 |
7 950 092 |
9 637 038 |
Cash and transferrable securities |
2 705 622 |
3 028 255 |
2 853 245 |
3 221 203 |
Participation in affiliated undertakings |
0 |
165 244 |
164 244 |
165 244 |
Other assets (fixed assets, accruals, …) |
252 740 |
175 022 |
112 274 |
117 329 |
TOTAL ASSETS |
14 827 674 |
10 755 800 |
11 079 855 |
13 140 814 |
(in EUR thousand) |
||||
|
2010 |
2011 |
2012 |
2013 |
|
|
|
|
|
Financial income |
552 090 |
752 007 |
676 177 |
722 610 |
Thereof from group companies |
528 267 |
672 225 |
655 576 |
711 218 |
Other income (dividends, financial gains on derivatives, exchange rates, …) |
29 708 |
18 962 |
18 117 |
8 935 |
Revenue from services to group |
6 410 |
7 616 |
2 336 |
2 027 |
Operating expense |
14 616 |
13 332 |
8 594 |
9 280 |
Financial expense |
550 331 |
729 851 |
654 763 |
706 825 |
Thereof to group companies |
523 123 |
698 009 |
625 216 |
687 712 |
Profit before corporate tax |
23 261 |
35 402 |
33 273 |
17 466 |
Tax |
5 968 |
10 112 |
8 822 |
6 952 |
Net profit |
17 292 |
25 290 |
24 450 |
10 514 |
|
|
|
|
|
Shareholders' equity |
271 047 |
268 610 |
268 837 |
256 053 |
Liabilities |
14 878 871 |
12 567 582 |
11 277 171 |
12 758 761 |
|
|
|
|
|
Financial assets |
9 267 614 |
8 201 011 |
9 164 768 |
9 905 386 |
Cash and transferrable securities |
5 519 622 |
4 349 837 |
2 201 190 |
2 928 409 |
Participation in affiliated undertakings |
358 362 |
264 116 |
160 833 |
160 833 |
Other assets (fixed assets, accruals, …) |
4 320 |
21 228 |
19 217 |
20 186 |
TOTAL ASSETS |
15 149 918 |
12 836 192 |
11 546 008 |
13 014 814 |
2.5.3.2.
Detailed information on FFT's assets and liabilities
(in EUR thousand) |
|||
Assets |
Average Outstanding |
Interest Received |
Interest divided by average outstanding |
Fiat group counterparty 1 |
[10 000 000 ] |
[500 000 ] |
[…] |
Fiat group counterparty 2 |
[150 000 ] |
[10 000 ] |
[…] |
Fiat group counterparty 3 |
[150 000 ] |
[10 000 ] |
[…] |
Fiat group counterparty 4 |
[100 000 ] |
[5 000 ] |
[…] |
Fiat group counterparty 5 |
[50 000 ] |
[4 000 ] |
[…] |
Fiat group counterparty 6 |
[20 000 ] |
[3 000 ] |
[…] |
Liabilities |
Average Outstanding |
Interest Paid |
Interest divided by average outstanding |
Fiat group counterparty 7 |
[450 000 ] |
[10 000 ] |
[…] |
Fiat group counterparty 8 |
[250 000 ] |
[400] |
[…] |
Fiat group counterparty 9 |
[200 000 ] |
[1 000 ] |
[…] |
Fiat group counterparty 10 |
[50 000 ] |
[200] |
[…] |
Fiat group counterparty 11 |
[50 000 ] |
[150] |
[…] |
Fiat group counterparty 12 |
[50 000 ] |
[150] |
[…] |
2.5.3.3.
Information on the Fiat group's transfer pricing policy
Arm's length range |
Beta |
Number of companies |
75 |
75 Percentile |
1,22 |
Median |
0,80 |
25 Percentile |
0,34 |
(%) |
||
Variable and expected RoE(55) |
Italy |
Luxembourg |
Risk-free rate |
1,57 |
1,57 |
Tax rate |
31,4 |
28,8 |
Equity risk premium |
7,73 |
6,00 |
RoE — 75 Percentile |
16,09 |
12,52 |
RoE — Median |
11,27 |
8,92 |
RoE — 25 Percentile |
6,16 |
5,10 |
2.5.4.
Luxembourg's Letter of 10 July 2015
3.
GROUNDS FOR INITIATING THE PROCEDURE
4.
COMMENTS FROM LUXEMBOURG
4.1.
Comments from Luxembourg on the Commission procedure
4.2.
Comments from Luxembourg on substantive errors in the Opening Decision
5.
COMMENTS FROM INTERESTED PARTIES
5.1.
FFT's first set of comments
5.1.1.
Misapplication of the OECD principles
5.1.2.
The Commission's selectivity analysis
5.2.
FFT's second set of comments
5.2.1.
The APA does not confer an ‘advantage’
5.2.2.
Lack of selectivity
5.2.3.
FFT's factual situation differs substantially from the decisions on Coordination Centres
6.
COMMENTS FROM LUXEMBOURG ON THIRD PARTY COMMENTS
7.
ASSESSMENT OF THE CONTESTED MEASURE
7.1.
Existence of aid
7.2.
Existence of a selective advantage
7.2.1.
Determination of the reference system
7.2.1.1.
Reference system composed of the general Luxembourg corporate tax system
7.2.1.2.
Article 164(3) L.I.R., the Circular and/or the relevant administrative practice do not constitute the appropriate reference system
7.2.2.
Selective advantage due to a derogation from the general Luxembourg corporate income tax system
7.2.2.1.
Selective advantage resulting from a deviation from the arm's length principle
7.2.2.2.
Preliminary observation: doubt expressed on the existence of a fixed tax base
7.2.2.3.
Methodological choices, parameters and adjustments underlying the contested tax ruling
7.2.2.4.
The choice of the TNMM and the functional analysis in the transfer pricing report
7.2.2.5.
The amount of capital to be remunerated
7.2.2.6.
The use of FFT's hypothetical regulatory capital as profit level indicator
7.2.2.7.
The inconsistent application of the Basel II framework to calculate that capital
7.2.2.8.
Inappropriate deductions from the capital to be remunerated
7.2.2.9.
The level of required return applied to the capital to be remunerated
7.2.2.10.
Conclusion on the amount of capital to be remunerated and level of required return on that capital
FF |
2010 |
2011 |
2012 |
2013 |
Net profit in EUR thousand |
17 292 |
25 290 |
24 450 |
10 514 |
Shareholders' equity in EUR thousand |
271 047 |
268 610 |
268 837 |
256 053 |
RoE (%) |
6,4 |
9,4 |
9,1 |
4,1 |
FFT |
2010 |
2011 |
2012 |
2013 |
Net profit in EUR thousand |
1 737 |
1 851 |
1 217 |
1 146 |
Shareholders' equity in EUR thousand |
285 625 |
287 477 |
288 693 |
289 839 |
RoE (%) |
0,6 |
0,6 |
0,4 |
0,4 |