Selectivity and the Arm's Length Principle in EU State Aid Law

This book investigates the relevance of the arm’s length principle in and for the selectivity assessment, crucial in article 107(1) of the Treaty on the Functioning of the EU.

Why This Book?

 During the past few years, the European Commission has increasingly focused on identifying fiscal State aid falling under the State aid prohibition enshrined in article 107(1) of the Treaty on the Functioning of the European Union (TFEU). The LuxLeaks affairs, in particular, drew the attention of the European Commission to the transfer pricing ruling practices of the Member States, which resulted in several negative decisions and extremely high recoveries. In the State aid assessment of transfer pricing rulings, the European Commission assigned a very special status to the arm’s length principle – a leading principle in international tax treaty law. For this reason, the European Commission’s decisions raised several questions concerning the complex area of fiscal State aid and, particularly, the application, interpretation and content of the selectivity criterion. The existence of an independent EU arm’s length principle that forms part of the selectivity analysis has been a focal point of scholarly discussions. This book examines the selectivity criterion, which is the most crucial condition of the State aid prohibition laid down in article 107(1) of the TFEU. More precisely, it investigates the relevance of the arm’s length principle in and for the selectivity assessment. The author specifically examines any potential special impact that the arm’s length concept may have on the selectivity analysis regarding Member States’ measures related to the corporate tax base determination for the purpose of article 107(1) of the TFEU. This is aimed at substantiating the potential existence of an EU arm’s length principle, either stemming from the selectivity criterion as such or its application to specific Member States’ tax measures.