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Luxembourg: Amazon's Luxembourg tax bill in the spotlight as EU widens probe

Thursday, 09 October 2014   (0 Comments)
Posted by: Author: Foo Yun Chee
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Author: Foo Yun Chee (Irish Independent)

Amazon's tax arrangements with Luxembourg are being investigated by regulators, as the online retailer becomes the latest global company to be accused of striking tax-minimising deals with an EU member state that may break bloc rules.

Technology giant Apple's tax affairs in Ireland are already under the spotlight after European authorities in June launched a probe into a tax treatment they claimed amounts to illegal state aid.

Corporate tax avoidance has come under the spotlight on both sides of the Atlantic in recent years, as perfectly legal deals with authorities help companies save millions of dollars. Critics say the deals are a form of subsidy at ordinary taxpayers' expense.

The European Commission is examining whether Luxembourg broke EU state aid rules by agreeing a deal which allows Amazon to operate almost tax free in Europe.

Amazon is structured so that all online sales in Europe are technically between customers and a Luxembourg company. Despite racking up almost €14bn of sales each year, Amazon's main European subsidiary, Amazon EU Sarl, reports almost no profit.

That is at least partly because it pays hefty fees to its immediate parent, Amazon Europe Holding Technologies (AEHT), a tax exempt partnership, in return for using Amazon intellectual property.

The Commission said it was investigating a 2003 deal between Amazon and Luxembourg that underpins this arrangement. The Commission said the agreement could give Amazon an economic advantage over other companies without such rulings.

The US company denied receiving preferential treatment.

"Amazon has received no special tax treatment from Luxembourg, we are subject to the same tax laws as other companies operating here," it said in a statement.

Luxembourg's finance ministry denied any wrongdoing.

"Luxembourg is confident that the allegations of state aid in this case are unsubstantiated and that the Commission investigation will conclude that no special tax treatment or advantage has been awarded to Amazon," it said in a statement.

Amazon is already locked in a court battle with the US Internal Revenue Service over the arrangement by which the Luxembourg partnership came to enjoy the rights to sell on Amazon's intellectual property outside the United States.

In court filings, Amazon has denied undercharging AEHT for these rights.

Companies found guilty of breaching EU rules on state aid could be forced to repay what Brussels determines to have been the amount of support given.

Amazon joins fellow US company Apple in the Commission's sights after the watchdog accused Ireland of swerving international tax rules in its tax arrangements with the iPhone maker.

The Commission is also investigating similar deals between coffee chain Starbucks and the Netherlands and Luxembourg tax rulings for a subsidiary of carmaker Fiat.

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