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Luxembourg To Appeal EU's Amazon Tax Ruling Decision

by Ulrika Lomas, Tax-News.com, Brussels

18 December 2017


The Luxembourg Government has decided to appeal the European Commission's decision in the Amazon state aid case, the Ministry of Finance announced on December 15.

In a brief statement posted on the Ministry's website, the Government argued that the tax ruling issued to Amazon, which was investigated by the Commission, does not constitute illegal state aid, and also took issue with the Commission's analysis of the company's transfer pricing arrangements in relation to the ruling.

"Luxembourg believes that the Commission has not established the existence of a selective advantage within the meaning of Article 107 TFEU (Treaty of the Functioning of the European Union)," it stated.

The European Commission, on October 4, 2017, concluded that a tax ruling issued by Luxembourg in 2003, and prolonged in 2011, lowered the tax paid by Amazon in the country compared with what comparable businesses would pay.

The Commission's decision notes that the tax ruling enabled Amazon to shift the vast majority of its profits from an Amazon group company that is subject to tax in Luxembourg (Amazon EU) to a company that is not subject to tax (Amazon Europe Holding Technologies). In particular, the tax ruling endorsed the payment of a royalty from Amazon EU to Amazon Europe Holding Technologies, which significantly reduced Amazon EU's taxable profits, the Commission said.

The Commission said the tax ruling endorsed an unjustified method to calculate Amazon's taxable profits in Luxembourg. In particular, it said the level of the royalty payments, endorsed by the tax ruling, was inflated and did not reflect economic reality. On this basis, the Commission concluded that the tax ruling granted a selective economic advantage to Amazon by allowing the group to pay less tax than other companies subject to the same national tax rules. In fact, the ruling enabled Amazon to avoid taxation on three quarters of the profits it made from all Amazon sales in the EU, it said.

The Luxembourg Government said that its appeal against this decision is motivated by the aim of "seeking legal certainty." The Government stressed that it "remains committed" to tax transparency and the fight against harmful tax practices.

"Luxembourg fully adheres to the OECD/G20 base erosion and profit shifting (BEPS) project, which will modernize international tax rules and create a global level playing field," the Ministry concluded.

TAGS: Finance | tax | business | European Commission | law | Luxembourg | internet | transfer pricing | G20 | Europe | BEPS

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