EU Court Dismisses NIKE's Challenge Against EU's Investigation Into Dutch Tax

The General Court of the European Union dismissed NIKE Inc.'s (NKE) challenge against the European Commission's decision to initiate the formal investigation procedure in respect of tax rulings issued by the Netherlands tax administration to subsidiaries of Nike in Netherlands.

The Court found that the European commission carried out its provisional assessment of the measures at issue in a diligent and impartial manner, and that it did not breach the principle of good administration. The same applies to the alleged breach of the principle of equal treatment.

In 2019, the European Commission decided to initiate a formal investigation procedure in respect of tax rulings issued by the Netherlands tax administration to Nike European Operations Netherlands in 2006, 2010 and 2015, and to Converse Netherlands in 2010 and 2015.

Those tax rulings validate for tax purposes a transfer pricing arrangement, in particular the level of royalties payable by Nike and Converse to other Nike group companies, which are not taxed in the Netherlands, in return for the use of intellectual property rights. The royalties are tax deductible from the taxable revenue of Nike and Converse in the Netherlands.

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