EU to rule Starbucks, Fiat tax deals illegal state aid: sources

By Foo Yun Chee

BRUSSELS (Reuters) - Starbucks and Fiat Chrysler Automobiles will be told next week that their tax deals breach EU state aid rules, three people familiar with the matter said on Thursday, as EU regulators seek to crack down on tax avoidance across the bloc.

Moves by the European Commission against the U.S. coffee chain and the Italian carmaker come after a year-long investigation which also involved iPhone maker Apple and online retailer Amazon .

Deals which help companies slash their tax bills, giving them an unfair advantage, have been in regulators' crosshairs since the global financial crisis of 2007-2009 left governments strapped for cash.

"The Starbucks and Fiat cases are ready," said one of the people.

The people said decisions regarding a Dutch tax deal involving Apple and arrangements by Amazon with the Luxembourg authorities would come later.

It was not clear whether the Commission would order the Dutch and Luxembourg authorities to recover a specific amount in back taxes, or provide a methodology for them to calculate the appropriate taxes to be paid.

Commission spokesman Ricardo Cardoso, Fiat Chrysler Automobiles and Amazon declined to comment. Starbucks said it continued to cooperate with the Commission's investigation, and Apple said it did not have anything to add on the timing of the EU's decision.

"The European Commission is doing an investigation and the progress of that investigation is up to the Commission," said Dutch finance ministry spokesman Paul van der Zanden. "I can't give comment as long as there is no conclusion."

The Starbucks case centres on its subsidiary Starbucks Manufacturing EMEA BV, which the Commission said may be benefiting from a calculation used by the Dutch tax authority which could underestimate its taxable profit.

European Commission President Jean-Claude Juncker, who was prime minister of Luxembourg at the time the arrangement with Fiat was reached, has taken political responsibility over the country's role in helping global companies avoid tax.

Fiat subsidiary Fiat Finance and Trade Ltd, which lends money to other Fiat companies, found itself in the firing line over its transfer pricing arrangement with Luxembourg.

Transfer pricing is the setting of prices for the transfer of goods or services from one subsidiary to another, which critics say is used to reduce tax liabilities in relatively high-tax countries. The cost should be the same as that which would have been paid had the transaction been with an unrelated company at market rates.

(Additional reporting by Thomas Escritt in Amsterdam; Editing by David Holmes)