The EU Commission said the investigation launched on October 2014 on States’ aids to multinational companies has been concluded. The results of this investigation involve the relationship between Luxembourg and Amazon. The Commission has concluded that the US company had to pay €250 millions of unsettled taxes, resulting from the 2003 agreement between the European State and the US company.

The illegal aids were achieved through a system of double company: one operating and one holding. Amazon created two different companies on the Luxembourg territory: the first one, “Amazon EU”, operates Amazon’s retail business throughout Europe – having over 500 employees and buying and selling items for all the national sites of Amazon. The second one, “Amazon Europe Holding Technologies”, acts as an intermediary between the operating company and Amazon in the US. This company holds the intellectual property rights for Europe, and the operating company pays to the holding one annual royalties for the use of the name “Amazon”.

On the press release it can be read: “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 Junker’s Commission notified that the 2003 agreement between the Junker’s government of Luxembourg and Amazon was poorly applied and had generated harm to both Luxembourg and the competition in the EU Single Market. Still in the press release, the Commission clarifies that the investigation did not question Luxembourg’s general tax system as such. In the next months, the Luxembourg’s tax authorities must decide the precise amount of taxes unpaid by Amazon on the national territory. This amount must be determined on the basis of the Commission’s decision, but it should be around € 250 million, plus interest.

If Luxembourg does not fulfil its duties, it may incur an infringement procedure, exactly like what has happened yesterday to Ireland, which never required Apple to pay €13 billions of taxes, unpaid because of a similar agreement that in 2016 the Commission considered as illegal aids. And for that, “The Commission has therefore decided to refer Ireland to the Court of Justice for failure to implement the Commission decision, in accordance with Article 108(2) of the Treaty on the Functioning of the European Union (TFEU).”

Tancredi Marini

For further information:

Commission’s release press:

Luxembourg: http://europa.eu/rapid/press-release_IP-17-3701_en.htm

Ireland: http://europa.eu/rapid/press-release_IP-17-3702_en.htm

Agenceurope: Bulletin Quotidien Europe 11876 – 5/10/2017