Margrethe Vestager – Photo © European Union 2017
(BRUSSELS) – Luxembourg has to recover some EUR 250m of tax benefits granted to Amazon, the EU ruled Wednesday, deemed illegal under EU rules, which allowed the firm to pay markedly less tax than other companies.
“Luxembourg gave illegal tax benefits to Amazon,” said the Competition Commissioner Margrethe Vestager: “As a result, almost three quarters of Amazon’s profits were not taxed. In other words, Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules.”
Following its in-depth investigation launched back in October 2014, the Commission has concluded that a tax ruling issued by Luxembourg in 2003, and prolonged in 2011, lowered the tax paid by Amazon in Luxembourg without any valid justification.
The EU executive says the tax ruling enabled Amazon to shift the vast majority of its profits from an Amazon group company that is subject to tax in Luxembourg (Amazon EU) to a company which is not subject to tax (Amazon Europe Holding Technologies).
In particular, the tax ruling endorsed the payment of a royalty from Amazon EU to Amazon Europe Holding Technologies, which significantly reduced Amazon EU’s taxable profits.
The Commission’s investigation showed that the level of the royalty payments, endorsed by the tax ruling, was inflated and did not reflect economic reality.
On this basis, the Commission concluded that the tax ruling granted a selective economic advantage to Amazon by allowing the group to pay less tax than other companies subject to the same national tax rules. In fact, the ruling enabled Amazon to avoid taxation on three quarters of the profits it made from all Amazon sales in the EU.
The role of EU State aid control is to ensure Member States do not give selected companies a better tax treatment than others, via tax rulings or otherwise.
Transactions between companies in a corporate group must also be priced in a way that reflects economic reality, says the Commission.
In order to remove the distortion of competition created by the aid, EU State aid rules require that incompatible State aid is recovered.
Further information
Amazon's tax structure in Europe - background guide
The non-confidential version of the decisions will be made available under the case number SA.38944 in the state aid register on the Commission’s Competition website once any confidentiality issues have been resolved. The State Aid Weekly e-News lists new publications of State aid decisions on the internet and in the EU Official Journal.
