The European Commission has ordered Amazon to pay €250 million (about $294 million) in back taxes plus interest after ruling that the company's 2003 tax deal with Luxembourg gave it tax benefits between 2006 and 2014 that were illegal under "EU state aid rules," the Bookseller reported.
At a press conference this morning, Margarethe Vestager, the EC's member in charge of competition, said, "Luxembourg gave illegal tax benefits to Amazon. 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. This is illegal under EU State aid rules. Member States cannot give selective tax benefits to multinational groups that are not available to others."
Amazon responded by saying: "We believe that Amazon did not receive any special treatment from Luxembourg and that we paid tax in full accordance with both Luxembourg and international tax law. We will study the Commission's ruling and consider our legal options, including an appeal."
The EC found that Amazon's deal with Luxembourg allowed it to shift most of its profits "from an Amazon group company that is subject to tax in Luxembourg (Amazon EU) to a company that is not subject to tax (Amazon Europe Holding Technologies)," the Bookseller wrote. "In particular, Luxembourg 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 that royalty payment was 'inflated and did not reflect economic reality.' "
The EC had made a preliminary ruling in early 2015 that the Luxembourg deal gave Amazon an unfair tax advantage.