In a recent development related to Luxembourg’s tax rulings, Advocate General Kokott suggested that the European Court of Justice (ECJ) dismiss the European Commission’s verdict, which accused Luxembourg of providing illegal state aid.

Although her recommendations are not binding, they could significantly influence the ECJ’s ultimate decision. If the ECJ accepts the Advocate General’s viewpoint, it could deeply affect the future methodology of state aid investigations by the Commission.

Please note that the final judgment in the cases awaits, with the ECJ being the ultimate authority.

A.G. Kokott expressed her opinion in the following terms:

“The Commission and the General Court proceeded on the basis of an incorrect reference framework. They had assumed that the Luxembourg tax law in force at the time contained a principle of correspondence, according to which a tax exemption for participation income at the level of the parent company is contingent on taxation of the underlying profits at the level of the subsidiary. Such a link is not, however, apparent and cannot simply be interpreted into Luxembourg law because it might be preferable. The EU institutions cannot use State aid law to shape an ideal tax law.”

“Not any incorrect tax ruling, but only tax rulings which are manifestly erroneous in favour of the taxpayer may constitute a selective advantage and be considered an infringement of State aid law “

If you require additional information, please don’t hesitate to contact our tax team.