Decision of the Commission: Amazon ordered to repay € 250 million taxes

Luxembourg tax authorities acted as accessary concerning Amazon’s tax tricks

The European Commission has been investigating Amazon’s business practices for three years. The findings of the investigations now have revealed the following: according to this, Amazon has used a holding structure (Amazon Europe Holding Technologies) to systematically cheat the tax authorities out of millions of euros. This would have been hardly possible without the active support of the Luxembourg authorities: based on a so-called tax ruling, Amazon only had to pay tax on a quarter of its profits. The ruling allowed the technology group to pay license fees to Amazon Europe Holding Technologies, which artificially reduced the profit generated by Amazon EU.

Amazon Holding as auxiliary structure to reduce tax payments

Due to the fact that Amazon Europe Holding has neither employees nor office space, one can work on the assumption that the holding was only set up for the purpose of avoiding tax payments. It also does not undertake any business transactions. According to the Commission, Amazon adopted this practice from May 2006 to June 2014. After that, Amazon restructured its corporation. Until now, the new business structure has not been the subject of investigations by the Commission.
From the point of view of the European Commission, the tax tricks used by Amazon represent an unjustified competitive advantage compared to other companies. Hence, the Commission has adopted a decision which requires the Luxembourg tax authorities to demand that Amazon repays the unjustified tax saving of around €250 million.

Commission takes action against Ireland in respect of Apple

As early as August 2016, the Commission had ordered Ireland to recover € 13 billion in unpaid taxes from Apple. In accordance with EU state aid rules, these concern unjustified tax advantages, which distort competition at the expense of all other companies. Ireland had until the beginning of January 2017 to comply with the Commission ruling. According to the Commission, Ireland has failed to even require a partial amount of the unjustified aid from Apple. Instead, Ireland has let it be known that it would take at least until March 2018 to calculate the exact amount, which was still open.
Because of her failure to act upon the Commission ruling, the Commission has now taken legal steps against Ireland. Now the European Court of Justice (ECJ) has to rule in the case. Ireland already launched an appeal with the ECJ in August 2016. The Commission points out that Ireland has to act on the ruling in spite of her appeal and the country is now faced to have a fine imposed on her. Hence, one may expect a prolonged legal dispute. In acting the way she did, Ireland has assumed the bizarre role of defender of the technology giant Apple, which due to the unjustified tax saving structure only paid 0.005 % in tax on the profits generated in 2014.