The Selective Advantage Criterion in Tax Rulings: The Path Towards a More Coherent and Thorough Analysis of Selectivity

Article 107(1) TFEU has long prohibited, as incompatible with the internal market, the granting of aid by Member States or through State resources which, by favouring certain undertakings or the production of certain goods, is capable of distorting competition and affecting trade between Member States. According to the settled case law of the Court of Justice of the European Union (‘CJEU’),1 this provision limits Member States’ exclusive competence in the field of direct taxation when national tax measures constitute fiscal State aid and gives the EU legitimacy to ensure State aid control.2 Therefore, although Member States remain generally competent to decide on their economic policy and the tax system they deem more suitable,3 they must exercise this competence in compliance with EU law.4 This includes ensuring that national tax measures, such as tax rulings, respect State aid rules.5 The Commission’s involvement in the field of direct taxation became apparent at the end of the 1990s. After the publication of its Notice on the application of the State aid rules to measures relating to direct business taxation,6 the Commission adopted a series of negative decisions finding that several Member States had adopted