EU: Amazon must pay 250 million euros in back taxes

The European Commission has ruled that Luxembourg has illegally provided tax benefits to Amazon. The country must reclaim 250 million euros from the American web store. Amazon would have transferred amounts to a holding company to avoid taxes.

Luxembourg used an illegal method to calculate Amazon’s profits in Luxembourg from 2003 to 2011, the European Commission concludes after an investigation that began in 2014. The method allowed Amazon not to pay taxes on nearly three quarters of its profits.

The profits were attributed to a holding company called Amazon Europe Holding Technologies. This was an ’empty shell’: a company without employees or an office, which served as an intermediary between the operational company Amazon EU and the American Amazon.

Amazon EU paid royalties to Amazon Europe Holding Technologies, reducing taxable profits. The holding company licenses intellectual property to Amazon EU and transfers its revenues annually to Amazon in the US for “the development of the intellectual property”, the European Commission describes.

The amount of 250 million euros that Amazon has to pay is an estimate. Luxembourg is required by the EU to determine the exact amount. There are no fines associated with illegal state aid. In June 2014, Amazon changed its corporate structure in Europe. This new structure was not the subject of the investigation that has now been completed.