Sadie Keljikian, Stern Corporate Services
Luxembourg is challenging the EU’s recent order to recover approximately €250 million in back taxes from Amazon.
On October 4th, the European Commission ruled that the Grand Duchy gave Amazon tax benefits in a 2003 deal, resulting in illegal state aid. The ruling detailed that the tax deal allowed Amazon to shift the vast majority of its profits to Amazon Europe Holding Technologies, which is not subject to taxes. The Commission claimed that Luxembourg’s tax authorities approved the profit-shift despite the holding company having “no employees, no offices and no business activities.”
Luxembourg, however, disagrees with the Commission’s assessment. Many believe that the EU capital is advocating for Amazon because 1,500 Luxembourg citizens are Amazon employees, a remarkable proportion of its half a million residents. Whatever the case, Luxembourg does not believe that the Commission sufficiently proved that Amazon received a selective advantage, nor does it agree with the Commission’s analysis of Amazon’s transfer pricing arrangements.
The Commission considers Luxembourg’s behavior an example of “state aid,” referring to governments giving big brands tax breaks to host them and stimulate the local economy. Several other state aid-related decisions have previously been appealed, like last year’s ruling, which required Apple to pay €13 billion to Ireland.
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