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Amazon under the spotlight again

The EC has opened an investigation into whether Luxembourg’s tax ruling on the tax paid by Amazon in Luxembourg complies with the EU rules on state aid.

Very broadly, tax rulings or transfer pricing arrangements may involve state aid if they provide selective advantages.

The ruling applies to Amazon’s Luxembourg-based subsidiary which records most of Amazon’s European profits.

Under the tax ruling, Amazon pays a tax deductible royalty to a partnership established in Luxembourg which is not subject to tax in Luxembourg.  As a result, most European profits of Amazon are recorded in Luxembourg, but are not taxed there.

The EC is concerned that the ruling could underestimate the taxable profits of Amazon and thereby provide an economic advantage by allowing the group to pay less tax than other companies whose profits are allocated in line with market terms.  The investigation seeks to determine whether this concern is justified.

 

 

Date: 4th November, 2014
Author: Cathy Corns

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