On 7 October, the European Commission informed that it has launched an in-depth state-aid investigation against Luxembourg. According to the Commission, the treatment Luxembourg provides for the subsidiary of American online retailer Amazon in terms of taxation, might constitute illegal state aid. Amazon does the majority of its EU business through its Amazon EU Sarl subsidiary based in Luxembourg. Although Amazon EU makes €14 billion every year from sales in the EU, it pays virtually no taxes at all. This is due to the fact that it pays very large sums to its parent, Amazon Europe Holding Tehnologies SCS (AEHT) also based in Luxembourg, for using Amazon´s intellectual property. As a result, Amazon EU Sarl has almost no profit and therefore pays zero corporate tax. As for the limited liability AEHT, due to Luxembourgish corporate tax ruling in favor of Amazon, the transaction between Amazon EU and AEHT is exempt from taxation. This tax ruling is in EC´s scope now. According to the Commission, the unreasonably high royalty fee exempt from taxation might not be in line with normal market conditions. If this were true, Luxembourg, by allowing this regime, would in fact grant illegal state aid to Amazon.
If the taxation deal is considered as an illegal state aid, Amazon may be forced to repay all the advantages he earned over the years. Amazon is facing a similar investigation by the IRS in the USA. The EC investigates also other Member States due to their tax regimes with large international companies – most notably Ireland and its deal with Apple.
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