EU Set to Order Luxembourg to Recoup Allegedly Unpaid Taxes From Amazon -- Update
By Natalia Drozdiak and Sam Schechner
BRUSSELS--The European Union's antitrust regulator is set to order Luxembourg to retrieve roughly several hundreds of millions of euros in allegedly unpaid taxes from Amazon.com Inc. as soon as Wednesday, according to people familiar with the matter.
The decision would come amid a renewed crackdown by the EU, which has promised to scrutinize tax arrangements between its various member states and big multinationals operating in Europe.
Regulators in Brussels have homed in on sweetheart tax deals governments have issued to large multinationals in allegedly illegal state aid. Last August, the European Commission ordered Apple Inc. to repay Ireland EUR13 billion ($15 billion) in what it said was uncollected taxes, a ruling both Apple and Ireland are contesting.
Luxembourg's tax practices in particular came under the spotlight after leaked documents revealed details of hundreds of highly favorable deals it has granted to companies including PepsiCo Inc. and FedEx Corp.
Since the Apple decision, Amazon has stood out as one of the largest targets that have been under investigation by the EU. The commission is also continuing to investigate Luxembourg's tax treatment of McDonald's Corp. and Engie SA.
The commission first opened its formal probe into Amazon's tax arrangements with Luxembourg in October 2014, arguing that a 2003 tax deal granted to Amazon in Luxembourg effectively caps the U.S. company's tax payments in the Grand Duchy.
Central to the case is a royalty fee, estimated at about EUR500 million annually, which Amazon's European head office, Amazon EU Sarl, pays to another Luxembourg subsidiary. The royalty, for use of the group's intellectual property rights, reduces Amazon's tax bill in Luxembourg because the second subsidiary isn't subject to local corporate tax.
The commission at the time said it questioned the methodology used to calculate that royalty, which it described as "cosmetic," and said Luxembourg's tax calculations didn't appear to comply with international guidelines. Luxembourg's authorities may not have properly assessed the 2003 deal given they approved it within "a very short period" of 11 working days, the regulator said at the time.