Amazon also facing tax showdown with European Union regulatory agency

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."

3 Comments
  1. Avatar
    prl99 Senior User Joined: Mar 24, 2009

    This doesn't sound like Apple's arrangement with Ireland. Would like to see the two compared. Amazon seems to be reducing US tax liability while Apple doesn't have anything similar. Yes/no???

  2. Avatar
    Mike Wuerthele Managing Editor Joined: Jul 19, 2012

    Amazon's got an extra step -- the patent holding company in Luxembourg. Apple just straight-out has based a company in a country with a tax deal.

  3. Avatar
    jreades Junior Member Joined: Feb 02, 1999

    They're both a bit cr*p -- respecting the letter (just about) but not the spirit of the law. Amazon's statement that they are following Luxembourg law is true, except that they don't actually *do* anything in Luxembourg except file returns. If I order something here in the UK it's ordered from a UK domain, fulfilled by a UK warehouse, marketed by people based in the UK, and so on and so on. To then say "Ah, but all of that really happened in Luxembourg is complete bollocks." As I understand it Apple's setup is a little different, but materially they are both 'tax efficient' in ways that most of us schmos wouldn't feel was fair.

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