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EU delivers €250m tax bill to Amazon

Image credit: reuters

Amazon has been slapped with a giant €250m (£222m) tax bill from the EU after it was deemed that the company was given an unfair tax advantage after it entered into a sweetheart tax deal with Luxembourg in 2003.

Amazon has said it was considering an appeal over the payment, although it is a far smaller bill than other tech giants have been faced with recently.

Apple, for example, was ordered to pay €13bn euros to Ireland last year, while Google was fined €2.4bn by antitrust regulators in June.

“Luxembourg gave illegal tax benefits to Amazon. As a result, almost three quarters of Amazon’s profits were not taxed,” said EU antitrust chief Margrethe Vestager.

EU antitrust chief Margrethe Vestager

Margrethe Vestager

Image credit: reuters

The Commission said the exact amount of tax to be reclaimed would still need to be calculated by Luxembourg authorities.

The probe into Amazon’s tax affairs was originally launched in October 2014 and looked at a 2003 tax agreement between Luxembourg and the retailer that saw most of Amazon’s European profits recorded in the country but not fully taxed.

Luxembourg, whose tiny economy has benefited from providing a welcoming European home for multinational companies, rejected the finding and said it was looking at its legal options.

Still, despite the size of the bill, Vestager was reportedly estimating that Amazon would have to pay at least €400m during the course of the investigation.

The Commission said Luxembourg allowed Amazon to channel a significant portion of its profits to a holding company without paying tax. The holding company was allowed to do this because it held certain intellectual property rights.

“The Commission’s investigation showed that the level of the royalty payments, endorsed by the tax ruling, was inflated and did not reflect economic reality,” the Commission said in a statement.

Amazon, which employs 1,500 in the grand duchy, is one of the biggest employers in the country of half a million people. It has a Europe-wide staff of some 50,000.

“We believe that Amazon did not receive any special treatment from Luxembourg and that we paid tax in full accordance with both Luxembourg and international tax law,” Amazon said in a statement after the announcement.

In 2016, Amazon made a $2.4bn profit on global revenues of $136bn.

McDonald’s is also facing fire from EU antitrust officials who are investigating claims that the fast-food giant avoided more than one billion euros in tax through the use of a royalties loophole in Luxembourg.

When it launched its investigation in 2015, the European Commission said the European arm of McDonald’s had paid virtually no corporation tax in Luxembourg or the US since 2009, despite making significant profits in the division.

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