User:Carola G. Tributario 2023/Sandbox

= Amazon's EU tax dispute =

Amazon’s EU tax dispute refers to a European Commission investigation on the alleged State aid to Amazon by way of a tax ruling arrangements between Luxemburg and Amazon. The scope of the investigation was part of a wider program to ensure that EU Member States do not give to selected companies a better tax treatment compared to others, via tax rulings or otherwise. The business model under investigation was composed by a Luxembourg limited partnership called Amazon Europe Holding Technologies SCS (LuxSCS), whose partners were US entities of the Amazon group, and a wholly owned subsidiary of LuxSCS called Amazon EU Sàrl (LuxOpCo). The last was the main operator in Europe. LuxSCS held the intangible assets and concluded a license agreement with LuxOpCo, whereby LuxOpCo could use the intangible assets for the Amazon group’s activities in Europe by paying a royalty to LuxSCS.

On 6 November 2003, the Luxembourg tax authorities granted to Amazon group a tax ruling stating that LuxSCS was not subject to Luxembourg corporate income tax and decided the system to calculate the royalty to be paid by LuxOpCo to LuxSCS”. The royalty paid to LuxSCS was deductible and LuxSCS was not subject to corporate taxation in Luxembourg.

On 24 March 2014, the Commission published a Press Release where it made public Luxemburg's refusal to deliver information by invoking fiscal secrecy and the consequential issuing of two injunctions ordering Luxemburg to provide the required information within one month.

On 7 October 2014, the Commission began a thorough investigation to determine whether the Luxembourg tax authorities' ruling regarding the corporate income tax that Amazon was required to pay in Luxembourg complied or not with the EU's State aid regulations.

For the occasion, Commission Vice President in charge of competition policy Joaquín Almunia said that:"'National authorities must not allow selected companies to understate their taxable profits by using favourable calculation methods. It is only fair that subsidiaries of multinational companies pay their share of taxes and do not receive preferential treatment which could amount to hidden subsidies. This investigation concerning tax arrangements for Amazon in Luxembourg adds to our other in-depth investigations launched in June. I welcome that cooperation with Luxembourg has improved significantly.'"Three years later, on 4 October 2017, the Commission found that the calculation method allowed LuxOpCo to pay a high royalty to LuxSCS so that LuxOpCo could artificially reduce its tax base in Luxemburg. According to the Commission, Luxembourg tax authorities granted to Amazon a tax ruling that may have violated EU state assistance regulations. The tax ruling permitted a structure in which the majority of Amazon's European revenues were reported in Luxembourg with a low rate of tax that was further reduced by paying royalties to another Amazon subsidiary in Luxembourg that was not subject to corporate tax.

Furthermore, the Commission's decision ordered Amazon to pay 250 millions euros plus interests declaring that EU Member States cannot favour multinational companies giving tax benefits that are not available for local businesses because it is a measure that distorts competition. The Commission based its claim on Article 107 of Treaty on the Functioning of the European Union which establishes that no State aid should distorts or threatens to distort competition between the Member States. Amazon and Luxemburg brough an action for annullment of the decision.

On 12 May 2021, the European General Court ruled that the 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. Therefore, the Commission lost the case and the decision was annulled.

A company's representative, Conor Sweeney, commented that Amazon welcomed Court's judgement and Amazon followed all applicable laws and that Amazon received no special treatment. Bloomberg's report showed that Amazon Europe unit paid no Taxes on $55 billion sales in 2021.

On 22 July 2021, the Commission appealed to the European Court of Justice sustaining that the Court made several errors of law.

The application of State aid law to tax rulings in order to tackle harmful tax competition was referred to as the Vestager doctrine.

Reference section
