Commission says McDonald’s and Luxembourg broke no state-aid laws

Decision is first where Vestager investigation found no illegal state aid

McDonald’s does not have to pay any additional tax in the EU as a result of the European Commission investigation. Photograph: Reuters

McDonald’s does not have to pay any additional tax in the EU as a result of the European Commission investigation. Photograph: Reuters

 

The European Commission has decided that arrangement between McDonald’s and Luxembourg, which allowed the fast food group to pay almost no tax on its European royalties in both the EU and US, did not break the bloc’s laws.

Wednesday’s decision is the first formal investigation in EU competition commissioner Margrethe Vestager’s five-year crackdown on tax rulings where she concluded that an arrangement was not illegal under the EU’s state-aid rules.

Ms Vestager said the in-depth investigation had found the reason for double non-taxation was “a mismatch between Luxembourg and US tax laws, and not a special treatment by Luxembourg.

“Therefore, Luxembourg did not break EU state aid rules.”

As there was no illegal state aid, the restaurant chain does not have to pay any additional tax in the EU.

Ms Vestager said “Of course, the fact remains that McDonald’s did not pay any taxes on these profits - and this is not how it should be from a tax fairness point of view. That’s why I very much welcome that the Luxembourg government is taking legislative steps to address the issue that arose in this case and avoid such situations in the future.”

New tax laws

The Luxembourg parliament is currently considering new tax laws that would “avoid similar cases of double-taxation in the future”, according to the commission.

To date, the commission has launched nine formal investigations and taken seven decisions that have forced the Republic, Luxembourg, Belgium and the Netherlands to recover billions of euros in back taxes from the likes of Apple, Amazon, Engie, Fiat, Starbucks, and more than 35 companies benefiting from a Belgium tax scheme. Many countries and companies, including the Republic and Apple,have appealed the decisions to the European court.

Earlier this month, Apple completed the transfer of €14.3 billion in back taxes into an escrow fund established by the State at the direction of the European Commission. – Copyright The Financial Times Limited 2018