The European Commission announced last month that it had opened three in-depth State Aid investigations involving Ireland, the Netherlands and Luxembourg. According to its statement, “The Commission has been investigating under EU state aid rules certain tax practices in several Member States following media reports alleging that some companies have received significant tax reductions by way of ‘tax rulings’ issued by national tax authorities.”

The State Aid rules can be contravened if tax rulings are used to provide selective advantages to a specific company. It would appear that the rulings in question have to do with transfer pricing. The Commission is at pains to point out that there is not a particular problem with tax rulings per se, nor are they questioning the general tax regimes of the three Member States concerned.

That said, a State Aid investigation is a serious matter for any country. The Department of Finance is already signalling that they will strenuously defend the Irish position. The Luxembourg authorities seem not to have cooperated to date with the Commission in their preliminary enquiries. There is no suggestion that anything other than full cooperation has been provided to date by the Dutch or the Irish.

More details will emerge over time as to the precise nature of the investigation being conducted by the Commission. The statement also notes that “in parallel to these three formal investigations, the Commission will continue its wider inquiry into tax rulings, which covers more Member States.”