Amazon also facing tax showdown with European Union regulatory agency
updated 10:22 am EDT, Tue October 7, 2014
by MacNN Staff
European Commission investigation Amazon Luxembourg operations
Similar to various tech corporations' arrangement in Ireland, Amazon has a special -- and legal -- tax arrangement with Luxembourg. Amazon's tax rate in the country, like Apple's, is now under fire by the European Commission for corporate tax avoidance. The European Commission is claiming that despite its legality, a favorable tax rate deal with Amazon's own patent holding company in Luxembourg violates European Union rules on state aid for corporations.
The European Commission notes that all of Amazon's online sales in Europe are funneled through a Luxembourg branch of the company. Amazon's main EU subsidiary, Amazon EU Sarl, reports almost no profit because of fees it pays to Amazon Europe Holding Technologies for using Amazon intellectual property, shoving revenue from €14 billion in sales to the tax exempt holding company.
Amazon issued a statement about the investigation, saying that "Amazon has received no special tax treatment from Luxembourg, we are subject to the same tax laws as other companies operating there." Amazon is facing a court battle in the US with the Internal Revenue Service over the Luxembourg partnership as well, with the US Government claiming that the US-based parent company undercharged the Luxembourg-based patent-holder for the rights to use the patents in Europe, which dramatically cut Amazon's US tax rate.
The Luxembourg tax authority agrees with Amazon's assessment of the situation. In a statement released after the news of the investigation went public, it said that "Luxembourg is confident that the allegations of state aid in this case are unsubstantiated, and that the Commission investigation will conclude that no special tax treatment or advantage has been awarded to Amazon."