Pay Luxembourg $294 mn in tax, European Union orders Amazon

BRUSSELS: The European Union ordered the world’s largest online retailer Amazon on Wednesday to pay back about 250 million euros ($294 million) in taxes to Luxembourg, saying it was given an unfair tax advantage from 2003.

Joining other US tech giants in the sights of EU antitrust chief Margrethe Vestager, Amazon said it was considering an appeal over the payment, though it was less than some close to the case had expected and a small fraction of the 13 billion euros that Apple Inc. was ordered to pay to Ireland last year.

“Luxembourg gave illegal tax benefits to Amazon. As a result, almost three quarters of Amazon’s profits were not taxed,” Competition Commissioner Vestager said.

The Commission said the exact amount of tax to be reclaimed would still need to be calculated by Luxembourg authorities.

Luxembourg, whose tiny economy has benefited from providing a welcoming European home for multinational companies, rejected the finding and said it was looking at its legal options.

The 250 million euros is significantly less than the 400 million euros which sources close to the matter told Reuters a year ago that Vestager was estimating at that time.

The Commission said Luxembourg allowed Amazon to channel a significant portion of its profits to a holding company without paying tax. The holding company was allowed to do this because it held certain intellectual property rights. “The Commission’s investigation showed that the level of the royalty payments, endorsed by the tax ruling, was inflated and did not reflect economic reality,” the Commission said in a statement.

Amazon, which employs 1,500 in the grand duchy, is one of the biggest employers in the country of half a million people. It has a Europe-wide staff of some 50,000.

“We believe that Amazon did not receive any special treatment from Luxembourg and that we paid tax in full accordance with both Luxembourg and international tax law,” Amazon said in a statement after the announcement.

In 2016, Amazon made a $2.4 billion profit on global revenues of $136 billion.