UK: European Commission’s finding of unlawful State aid annulled, judgment of General Court set aside (CJEU judgment)
The CJEU found that the EC and the General Court erred in law.
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September 19, 2024
The Court of Justice of the European Union (CJEU) today annulled the decision of the European Commission (EC) that certain UK rules on the taxation of controlled foreign companies (CFCs) constitute unlawful State aid and thus set aside an earlier judgment of the General Court confirming the EC’s decision.
The case identifying information is: Joined cases United Kingdom and Others v. Commission (C-555/22), ITV v. Commission and Others (C-556/22) and LSEGH (Luxembourg) and London Stock Exchange Group Holdings (Italy) v. Commissioner and Others (C-564/22).
Summary
As explained in a CJEU release:
- In 2019, the EC decided that between 2013 and 2018 the United Kingdom had granted unlawful State aid to certain multinational groups by granting selective tax advantages by way of exemptions from the “CFC charge.” It found in particular that the relevant reference framework for examining whether there was a selective advantage consisted of the rules applicable to CFCs and that the exemptions from the CFC charge were a derogation from that framework.
- The United Kingdom and certain taxpayers challenged that EC decision before the General Court of the European Union, and in 2022, the General Court delivered a judgment rejecting their actions and upholding the EC’s decision.
- The CJEU today annulled the EC’s decision and set aside the judgment of the General Court, finding that the EC and the General Court erred in law in finding that the rules applicable to CFCs constituted the appropriate reference framework for examining whether a selected advantage had been conferred. Rather, as argued by the United Kingdom, the reference framework is the general corporation tax system, which is largely based on the principle of territoriality, of which the rules applicable to CFCs form part. The rules applicable to CFCs are not severable from the UK’s general corporation tax system and therefore cannot constitute the relevant reference framework.