European State Aid and Tax Rulings
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European State Aid and Tax Rulings

Liza Lovdahl Gormsen

This book investigates whether the European Commission (EC) has the mandate to legislate on direct taxation in sovereign states and ultimately questions whether the EC’s enforcement action in recent tax ruling cases, in the area of state aid, respects the rule of law.
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Chapter 3: Arm’s length principle

Liza Lovdahl Gormsen


This chapter focuses on three interrelated issues linked to the arm’s length principle. First, it considers the Commission’s legal basis for adopting an autonomous ALP different from that of the OECD (hereafter ‘the Commission ALP’) and making it an inherent part of Article 107 TFEU. Second, it questions the Commission’s methodology for applying the ALP, namely de facto using the Commission ALP as the appropriate reference framework in its analysis of a selective advantage rather than the national tax legislation. This analysis will include the Commission’s assertion that a breach of the Commission ALP confers a selective advantage within the meaning of Article 107(1) TFEU. Third, it challenges the Commission’s view that integrated and non-integrated companies are in the same factual and legal situation for tax purposes.

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