Amazon wins appeal against €250m Luxembourg bill

Decision another blow for Vestager crackdown on preferential tax deals

Margrethe Vestager pictured in 2017. Amazon’s victory follows last year’s landmark court defeat for the EU commissioner against Apple, which contested a record €13 billion tax order relating to the Republic. Photograph: AFP via Getty

Margrethe Vestager pictured in 2017. Amazon’s victory follows last year’s landmark court defeat for the EU commissioner against Apple, which contested a record €13 billion tax order relating to the Republic. Photograph: AFP via Getty

 

Amazon has won its bid to topple a €250 million tax bill in another blow to European Union competition chief Margrethe Vestager’s crackdown on preferential fiscal deals.

Amazon didn’t get special treatment from Luxembourg’s tax authority, the EU General Court ruled on Wednesday.

The European Commission “did not prove to the requisite legal standard that there was an undue reduction of the tax burden of a European subsidiary of the Amazon group,” the Luxembourg-based EU judges said.

Amazon’s victory follows last year’s landmark court defeat for the EU commissioner against Apple, which contested a record €13 billion tax order relating to the Republic.

The tech giants were both targeted as part of Ms Vestager’s eight-year crusade against allegedly unfair treatment doled out by EU nations such as Luxembourg, the Republic and the Netherlands to attract some of the world’s leading companies.

It was not all bad news for Ms Vestager, as judges rejected Engie SA’s appeal against an order to pay back about €120 million to Luxembourg. Both of Wednesday’s decisions can be appealed.

Court challenges are piling up, as companies hit with tax-repayment orders from Vestager argue that deals to reduce their fiscal liabilities were legal before the EU labelled them as unfair subsidies. Since last year’s Apple case, EU enforcement against so-called tax rulings handed out by nations to selected businesses has slowed.

Political focus

How big companies reduce their tax bills has become a political focus with EU regulators planning a new tax on technology firms if global tax reforms can’t be agreed.

While the amount at stake in the Amazon case is relatively tiny following a record earnings quarter for the company, tax experts see the outcome of its appeal helping to shape ongoing cases. These include investigations into Dutch tax treatment of Nike and Ikea units.

Amazon’s tax deal with Luxembourg, the base for the retailer’s European operations, allowed the company to cut its taxable profits “to a quarter of what they were in reality,” the European Commission decided in 2017.

The regulator found that Amazon’s tax rulings “significantly” reduced taxable profits and “did not reflect economic reality”. The structure was in place from May 2006 to June 2014, the EU said. The company then changed to a new structure.

In Engie’s case, the EU decided Luxembourg had selectively deviated from provisions of national law to help lower the tax bill for France’s former natural-gas monopoly.

Amazon’s European retail business paid no corporate tax in Luxembourg last year, reporting a €1.2 billion loss which exempted it from corporate tax on revenue of €44 billion, the New York Times said this month.

‘Conflated’

Amazon said in a recent blog post that “what Amazon pays in corporate tax in an entity in Luxembourg with what Amazon pays Europe-wide” are often “wrongly conflated” in media reports.

“We pay corporate tax in countries across Europe amounting to hundreds of millions of euros, and we operate in full compliance with local tax laws everywhere,” it said. – Bloomberg