The European Commission on February 27 published the non-confidential version of its decision concluding that Luxembourg illegally granted Amazon state aid through a tax ruling that reduced Amazon’s tax bill by about 250 million euros (USD 304.7 million) over eight years.
The decision, first announced October 4, 2017, calls for the unpaid taxes plus interest to be repaid by Amazon to Luxembourg. Luxembourg is appealing this decision in EU General Court.
At issue is a tax ruling granted by Luxembourg to Amazon in 2003 that applied to Amazon’s tax 2006–2014 tax years.
The Commission concluded that the method for calculating a royalty, sanctioned by the Luxembourg tax ruling, produced an outcome that departs from a reliable approximation of a market-based outcome resulting in a reduction of Amazon EU Société à responsabilité limitée (LuxOpCo’s) taxable basis for Luxembourg corporate income tax purposes.
According to the Commission, the transfer pricing arrangement sanctioned in the ruling was based on the inaccurate and unsubstantiated assumption that the licensor holding company, Amazon Europe Holding Technologies SCS (LuxSCS), a fiscally transparent entity held by US-based partners, would perform unique and valuable functions in relation to intangibles, whereas the licensee, LuxOpCo, would perform solely “routine” management functions.
The contested ruling was also relied upon by LuxSCS and its US partners to confirm that neither was subject to Luxembourg corporate income tax or other Luxembourg taxes.
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