In recent years, the European Commission has opened a series of high-profile State aid investigations into the tax arrangements used by multinational corporations in the European Union. There have been so many that President Trump has even dubbed Margrethe Vestager, the European Commissioner for Competition who heads up the probes, as a “tax lady”.

On 10 January, arrangements connected to another high-profile multinational were revealed to be under investigation. The European Commission has opened an in-depth “Phase 2” investigation into whether tax rulings made by the Netherlands to the benefit of Nike may have breached State aid rules.


The Commission is investigating the way that the Netherlands treats the tax arrangements of two Nike group companies established in the Netherlands (the “Trading Companies”) which are responsible for developing, marketing and selling Nike and Converse products in the EMEA region.

In order to do so, the Trading Companies license intellectual property rights relating to the ‘Nike’ and ‘Converse’ brands from two other Nike group companies. These royalty payments are tax-deductible, meaning that the tax liability of the Trading Companies in the Netherlands is reduced.

However, the companies to whom the royalty is paid are not taxed in the Netherlands because they have no employees and do not carry out any economic activity.

Why might the Commission have a problem with the treatment of Nike?

The Commission’s key concern is that the royalty payments “may not reflect economic reality” i.e. that they are inflated. The Commission is concerned that the payments may be higher than what independent companies negotiating on market terms would have agreed between themselves on an ‘arm’s length’ principle – which is the usual requirement.

The Commission intends to investigate whether five Netherlands tax rulings made between 2006 and 2015 were correct to endorse Nike’s approach to calculating royalty payments. The Commission is concerned that if the tax rulings enabled Nike to unfairly reduce its taxable base in the Netherlands, that Nike may have been granted a selective advantage - paying less tax than competing companies who priced their intra-group transactions at market rates.


The investigation forms part of a wide suite of investigations into a range of companies including Apple, Amazon, Starbucks, IKEA, Engie and Fiat. In each case, the mechanism used to allegedly reduce tax liability on a selective basis is a little different, but the general principle is the same; the Commission is concerned that certain favoured multinationals may be receiving tax advantages from EU Governments in contravention of State aid laws.

If the Commission finds that there has been illegal aid (and assuming this is upheld by the EU Courts) the Netherlands could be required to recover the illegal aid from Nike, together with any interest accrued.

More generally, the risk of State aid repayments for a major corporate could be significant. As the tempo of European Commission investigations increases, corporations would be prudent to assess their intra-group transfer arrangements against the Commission’s State aid concerns, to ensure their continued compliance.