The District Court of Breda recently ruled in line with an earlier ruling by the District Court of Harlem3, that fines imposed for infringing Dutch competition law are not deductible for corporate tax purposes.4 Cartel fines imposed by the European Commission, on the other hand, are partly deductible. Or at least, so the District Court of Harlem thinks.5 If it is up to Advocate General Mengozzi, however, the European Commission will have a say in the matter.6
Similar to the earlier reasoning by the District Court of Harlem, the Breda District Court ruled that Dutch corporate income tax legislation explicitly excludes the possibility to deduct fines imposed by the NMa as a result of competition law infringements.
The fact that the District Court of Harlem earlier ruled that the alleged non-punitive part of cartel fines imposed by the European Commission qualified as tax deductible was no reason to rule differently.7 Even though the Dutch competition rules mirror the European rules, the fact remains that Dutch corporate income tax legislation expressly excludes such possibility.
Still, it remains to be seen whether the (partial) tax deductibility of European Commission fines will be upheld in the pending appeal, particularly now that Advocate General Mengozzi recently concluded that Article 15(3) of Regulation 1/2003 enables the European Commission to intervene as amicus curiae in the appeal.8 The fact that the case does not relate to the direct application of the European competition rules was considered irrelevant. According to the Advocate General, the main question to be answered in determining the European Commission’s competence to intervene is whether the national proceeding is capable of affecting the coherent application of the European competition rules.
Hopefully the Court of Justice will follow the Advocate General’s opinion, as the Commission’s intervention in appeal may bring an end to the current inconsistency in tax deductibility. If not, it will lead to the odd situation of companies rooting for (tax deductible) European fines, even though Regulation 1/2003 enables the NMa to apply the European competition rules just like the European Commission.