Part of Amazon tax deal was ‘cosmetic’

The European Commission, which rules on competition and subsidies in the European Union, announced in October that it had opened an investigation into a tax ruling struck in 2003 and published details of its case today.

The investigation, one of a number into large international companies, focuses on whether Luxembourg broke EU state aid rules by allowing Amazon to operate almost tax-free in Europe.

The document released today described the online retailer’s structure, with a Luxembourg company functioning as the headquarters of its European operations and operator of all its European websites. The net turnover of that company, which it called LuxOpCo, was 13.6bn euros ($15.8bn) in 2013, about a fifth of worldwide sales of $74.5 billion.

The Commission’s inquiry centres on the relationship between LuxOpCo, pooling revenue from Amazon’s EU websites, and Lux SCS, which received a royalty from LuxOpCo and was not subject to Luxembourg tax.

The report said it had doubts whether the transfer pricing agreed by Luxembourg for Amazon reflected what a prudent independent operator would have accepted under normal market conditions. The Commission further noted that the ruling requested by Amazon was assessed and accepted within just 11 working days. The presentation of the royalty payment, expressed as a percentage of revenue, seemed to be a “cosmetic arrangement”, the document said.

A spokesman for Amazon, which has a 450,000 sq ft warehouse facility outside Doncaster, said: “Amazon has received no special tax treatment from Luxembourg - we are subject to the same tax laws as other companies operating here.”