Amazon ordered to pay £221m in back tax

● Luxembourg told to recover cash after EC rules it gave retailer ‘illegal benefits’

Amazon has been ordered to pay around €250 million (about £221m) in back taxes after the European Commission ruled it received “illegal tax benefits” under a sweetheart deal with Luxembourg.

The Commission said Luxembourg must now recover the unpaid taxes after finding its agreement with Amazon allowed the firm to pay “substantially less tax than other businesses”.

The European Union’s competition commissioner, Margrethe Vestager, said: “Luxembourg gave illegal tax benefits to Amazon. As a result, almost three-quarters of Amazon’s profits were not taxed. In other words, Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules.

“This is illegal under EU state aid rules. Member states cannot give selective tax benefits to multinational groups that are not available to others.”

The decision follows a threeyear investigation into a 2003 tax agreement between Luxembourg and the retailer that saw most of Amazon’s European profits recorded in the country, but not fully taxed.

Amazon said it was considering launching an appeal against the ruling.

A spokesman said: “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. We will study the Commission’s ruling and consider our legal options, including an appeal.”

It comes after the Commission last year hit US tech giant Apple with a €13 billion (£11.5bn) tax bill in the wake of an investigation which found that Apple paid €50 in tax for every €1m of profit made outside the US in 2014.

The Commission separately announced yesterday it was referring the Republic of Ireland to the European Court of Justice for failing to recover the unpaid taxes from Apple.

On the Amazon decision, the Commission said the Luxembourg deal slashed the retailer’s tax bill “without any valid justification”.

Luxembourg must now calculate and recover the exact amount of unpaid taxes from Amazon, which the Commission said was estimated at around €250m, plus interest.

Theluxembourgministryof finance said it was also looking at its legal rights after the ruling.

It said: “The decision of the Commission refers to a period going back to 2006. Over time, both the international and the Luxembourg legal frameworks have substantially evolved.

“As Amazon has been taxed in accordance with the tax rules applicable at the relevant time, Luxembourg considers that the company has not been granted incompatible state aid.”

It marks the latest EU regulatory decision to affect a major US firm, with Ms Vestager putting the tax affairs of a number of high-profile targets under the microscope in recent years.

Amazon has already been under pressure over taxes in Britain – earlier this summer it was found to have paid 50 per cent less UK corporation tax last year, despite a 54 per cent jump in turnover.