Nike: State aid
Posted - 25.02.2019
On 10 January 2019, the European Commission announced the opening of an in-depth State aid investigation, focusing on transfer pricing, concerning five tax rulings issued by the Dutch tax authorities from to 2006 to 2015, two of which are still in force. These rulings were issued to two Nike Group companies being Nike European Operations Netherlands BV and Converse Netherlands BV.
The said companies, which are operating companies which develop, market and record the sales of Nike and Converse in EMEA region, have obtained licences from tax transparent Dutch Nike entities, to use intellectual property rights with respect to Nike and Converse in consideration for tax deductible royalty payments.
The Commission’s concern is that these royalty payments may not be made on an arm’s length basis, as they appear higher than what independent companies would have agreed on between themselves. The Commission therefore questioned whether the royalty payments reflect economic reality, and even more so that the recipients of the royalties have no employees and do not carry out any economic activity.
The Commission will investigate on whether the tax rulings have unduly reduced the taxable base in the Netherlands of Nike European Operations Netherlands BV and Converse Netherlands BV, which would have benefited as such from illegal State aid not available to other undertakings.