For the purposes of Article 107 TFEU, State aid arises where:

• there has been an intervention by the State or through State resources
• the intervention gives the recipient an advantage on a selective basis
• competition has been or may be distorted;
• the intervention is likely to affect trade between Member States.

Most attention in respect of the ‘tax rulings’ cases currently being litigated is focused on the issues of ‘advantage’ and ‘selectivity’, the other conditions being taken as satisfied. Conor Quigley accordingly has pointed out, the ‘Commission appears to assume that any tax ruling is by its nature an intervention by the state’. But as he goes on to note:

“In principle, a tax ruling is merely an advance means of determining the allocation of profits that are to be subject to the tax assessment. The tax ruling is not an intervention by the state that derogates from any assessment. On the contrary, it is an integral part of the assessment procedure.”

Quigley is right to highlight the nature of a tax ruling and the fact that its interaction with the test for ‘intervention’ is not straightforward. In particular deeming a non-binding tax ruling to be an intervention raises serious tricky definitional and conceptual issues.

Taking a step back, tax authorities engage in a whole host of activities which are directed at ensuring that taxpayers comply with their obligations (and that taxpayers benefit from the rights granted by legislation). To that end tax authorities provide mechanisms by way of which taxpayers can communicate with them in order to receive answers to questions that they have: helplines, webinars, twitter etc. Tax authorities also proactively assist taxpayers for instance by sending out reminder emails and publishing guidance. At the same time, tax authorities also conclude legally binding agreements with taxpayers in respect of their rights and obligations. These activities all fall on a sort of ‘cooperation spectrum’, the most basic common feature being that the tax authority has given some positive assurance to the taxpayer as to the treatment of their tax affairs.

Tax rulings fall on the cooperation spectrum as they are a means for tax authorities to answer the questions of taxpayers – and they can be formal or informal, oral or in writing. Critically, not all tax rulings are legally binding. The effect of the ruling then will depend upon its nature.

A binding tax ruling might safely be understood as having legal effect when it is concluded and to that end, the date that the ruling is concluded should be taken as the date of intervention. But what about a non-binding ruling? The assumption that a non-binding tax ruling is an intervention for the purposes of the State aid assessment ignores the reality of tax administration and brings up critical questions in respect of both time and effect which do not arise in the case of a legally binding agreement between a tax authority and a taxpayer.

Sure in the case of a non-binding ruling the tax authority has given some positive assurance as to how a particular transaction or arrangement will be treated, but critically does not have binding effect. The intervention surely only has effect at a later time when the non-binding ruling is confirmed. But when is it confirmed? Is it when the tax return on which the ruling is based is submitted? Or is it the date that the tax return is accepted? If it is the date that it is accepted, is that the date that the deadline for the submission of returns has elapsed? Or is it the date that the opportunity for the tax authority to challenge the tax return has passed? If it is once the deadline for challenging the return has passed, then the issue becomes fraught with difficulty as different deadlines attach depending on the type the return that has been submitted (e.g. a tax return or a claim for relief), the knowledge of the tax authority (both from the return and from other sources) and the intention of the taxpayer (for instance whether unscrupulous or merely negligent).

Even beyond the issue of allocating a time to the intervention, how does one distinguish a non-binding ruling from the other activities that take place on the cooperation spectrum. Is it on the basis of the level of positive assurance that has been granted? If this is the case, the test for intervention should not be overly constricting as there are good reasons, most principally the rule of law (as I advance in my forthcoming book), as to why tax authorities should positively provide assistance to taxpayers. If the level is set too low then this would mean that a whole manner of taxpayer communications could give rise to State aid.

Further, it should be highlighted that taxpayers submit returns regardless of tax authority cooperation – for instance, Apple may well have submitted their tax returns in Ireland in the exact same manner without the tax authority assurances. Should there be an additional requirement of causation to that end (i.e. did the tax authority communication change the taxpayers’ action in respect of their tax return)? If there is not some additional causative requirement then the exact same outcome will be deemed State aid in one scenario but not in another purely because a tax authority has issued some assurance which had no impact on the taxpayer’s actions.

On the other hand of course if a non-binding ruling is not considered an intervention for the purposes of the State aid rules, then tax authorities would simply cease issuing binding rulings and instead focus efforts on granting favourable treatment through non-binding advice which would fall outside the scope of Article 107.

These issues are far from academic. The Apple case which is currently being litigated did not concern binding rulings, but rather informal rulings which informed the tax returns that were accepted by the Revenue Commissioners. Drawing the boundaries in respect of non-binding rulings will necessarily have an impact on the activities of tax authorities and caution must be urged.