By Julie Martin, MNE Tax
The European Commission on July 19 released a copy of its decision to widen the scope of its in-depth investigation into the Netherlands’ tax treatment of an IKEA subsidiary, Inter IKEA Systems. The decision was announced on April 30; however, the formal letter was withheld so that confidentiality issues could be resolved.
The Commission, on December 18, 2017, launched an investigation into whether tax rulings issued by the Netherlands to Dutch subsidiary Inter IKEA Systems in 2006 and 2011 allowed Inter IKEA Systems to reduce taxable profits in the Netherlands, giving it an unfair competitive advantage in breach of EU State aid rules.
The 2011 Dutch tax ruling endorsed the price paid by Inter IKEA Systems for the acquisition of intellectual property from a related Luxembourg company and the deductable interest to be paid under an intercompany loan used by the Dutch subsidiary to finance the purchase.
The Commission in 2017 said it was concerned that the transfer price of the IKEA intellectual property rights sanctioned in this ruling may be too high, allowing Inter IKEA Systems to pay less tax.
The Commission, in this follow up announcement, said that after it launched the 2017 investigation, Inter IKEA Systems began to amortize the IKEA IP rights and the Dutch tax authorities confirmed the deduction of the amortization in their annual assessments of Inter IKEA Systems’ tax returns.
The Commission said it has therefore extended the scope of its investigation to cover the Netherlands’ annual tax assessments of the amortization deductions of the IKEA IP rights. The Commission says that it has provisionally determined that the Dutch tax administration’s income tax assessments created an advantage to IKEA in breach of the State aid.
Julie Martin
Julie Martin is the founder of MNE Tax. She edits the publication and regularly contributes articles on new developments in cross-border business taxation.
Julie has worked as a tax journalist and editor for more than 13 years. Prior to that, she worked as an in-house tax attorney in New York. She also holds an LLM in taxation from New York University School of Law.
Julie can be reached at [email protected].
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While the link provides an English version of the announcement, the actual letter seems to be only available in Dutch. It would be interesting to see an English translation of the entire notice.