Amazon was hit with an order to repay as much as €250 million, plus interest, after the European Commission said Luxembourg illegally slashed the company’s bill, making the world’s biggest online retailer the latest U.S. giant to fall afoul of the EU’s state-aid rules.
“Luxembourg gave illegal tax benefits to Amazon” and “as a result, almost three-quarters of Amazon’s profits were not taxed,” EU Competition Commissioner Margrethe Vestager said in an emailed statement, adding that “Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules” and “this is illegal under EU State aid rules.”
.@amazon tax benefits in Luxembourg are illegal under our common European rules on state aid. Amazon to repay benefits worth around €250 mio
— Margrethe Vestager (@vestager) October 4, 2017
EU explained that the Luxembourg tax ruling given to Amazon in 2003 and prolonged in 2011, lowered the online retail giant’s tax paid in the country “without any valid justification.” The Luxembourg tax pact gave Amazon a “selective economic advantage” by allowing the online retailer’s group “to avoid taxation on three-quarters of the profits it made from all Amazon sales in the EU,” EU says in statement.
Explaining the decision, Vestager told reporters that “what we did investigate is the method to determine the royalty paid by the operating company to the holding company” and said that “the royalty payment level “could not be justified for two reasons. First, the holding company was an empty shell. Second, the operating company was the only company actively taking positions, carrying out activities relating to amazon’s European retail business”
Tax ruling was based on an “unjustified method to calculate Amazon’s taxable profits in Luxembourg,” reducing them to a “quarter of what they were in reality,” the EU said, and noted that Luxembourg will have to determine the exact amount it will have to recover from Amazon, based on the EU’s methodology.
