After Apple and Amazon was attacked by the European Commission for tax evasion...
Luxembourg has provided unlawful state aid to the US online trader.
The European Commission has found that Luxembourg has given illegal State aid to Amazon, which has resulted in almost three-quarters of the online merchant's profits in EU countries being taxed. The total amount of the damage was EUR 250 million over a period of eight years in which the duchy granted preferential tax treatment to Amazon. Now Luxembourg has to reimburse the amount.
This is another European Commission decision against the trio of American technology giants - Amazon, Google and Apple. The online search engine was fined four months ago with 2.4 billion euros benefiting from its monopoly position. Previously, the EC found that Ireland had given state aid for 13 billion euros to Apple.
Two companies from the US online merchant group are registered in Luxembourg. Amazon Europe, which is an operating company, pays the profit tax on the sales of its divisions in Europe in Luxembourg. The other company, Amazon Europe Holding Technologies (AEHT), holds the rights to online merchant technology for Europe and is not taxable in Luxembourg. Every year, Amazon Europe pays a license fee to AEHT for the rights to use the technology. This amount was accordingly reduced to Amazon Europe's taxable profit.
In the recent US tax investigation against Amazon, it is clear that the US company receives a much lower license fee than its European subsidiary than Amazon Europe has paid to AEHT. The difference was probably part of the US giant's aggressive campaign to optimize its taxes. This is one of the reasons for the European Commission to complete its investigation, which began in 2014, and conclude that Amazon Europe Holding Technologies is a practically fictitious company.
"As a result of this policy, Amazon has paid around four times less taxes than its local competitors in the countries where it operates," said Competition Commissioner Margarete Vestagger at a press conference in Brussels which announced the decision of the Directorate General "Competition".
The moment the EC attacks the two tax evasion companies, a tax reform is being discussed in the US to tax the profits of US companies abroad. This may trigger a tax war between the EU and the US, something that US President Donald Trump has repeatedly warned about.
Vestager underlined that the decision is not directed against US companies operating in Europe. Its goal is to place all players on the market on an equal footing.
Ireland to Court
At the same time, the EC announced it has decided to hand over Ireland to the European Court after the country has not taken steps to recover from Apple the 13 billion euros of illegal state aid. The EC has identified aid more than a year ago.
Previously, the European Commission concluded that Luxembourg and the Netherlands had granted selective tax advantages to Fiat and Starbucks, and Belgium had similar advantages to 35 companies.