U.S. sportswear maker Nike on Monday urged Europe’s second-highest court to annul an EU investigation into its Dutch tax rulings, saying the bloc’s competition enforcers had failed to show these amounted to illegal state aid.
The European Commission launched an investigation into Nike’s Dutch tax status in January 2019, part of a crackdown on multinationals’ sweetheart tax deals with EU countries giving them an unfair advantage.
At issue are five tax rulings issued by Dutch authorities from 2006 to 2015, two of which are still in force, which endorsed a method to calculate royalty payments to Nike’s Dutch entities – Nike European Operations Netherlands and Converse Netherlands – for the use of intellectual property.
EU enforcers said the royalty payments appeared higher than those which independent companies would have agreed between themselves, and may have unduly reduced the Dutch entities’ taxable base and given Nike a selective advantage amounting to illegal state aid.
The Commission’s preliminary assessment that state aid is involved contained legal errors, Nike said in its arguments, according to a filing on the Luxembourg-based General Court’s website.
EU regulators also failed to provide “sufficient reasons for finding that the contested measures fulfil all elements of state aid, especially why they should be regarded as selective”, the company said.
The sportswear company also faulted the Commission for rushing to open a formal investigation “where there were no difficulties to continue the preliminary investigation.”
The Commission has a mixed record in its campaign against unfair tax deals, with Apple winning its legal fight against a 13 billion euro Irish tax order and Starbucks against a 30 million euro Dutch tax order.
It won the court’s backing in Fiat’s Luxembourg tax case. Judges will rule on Nike’s challenge in the coming months.
The case is T-648/19 Nike European Operations Netherlands et Converse Netherlands v Commission.