Amazon to face EU tax probe
Amazon, the online retailer, is to be investigated by the European Commission over its corporate tax practices.
The probe will look at the tax agreement made between Amazon and Luxembourg which the EC believes amounts to state aid.
Most of Amazon's European profits are "are recorded in Luxembourg but are not taxed in Luxembourg", said EU competition commissioner Joaquin Almunia.
Amazon is structured so that all online sales in Europe are technically between customers and a Luxembourg company. Despite racking up almost 14 billion euros of sales each year, Amazon's main European subsidiary, Amazon EU Sarl, reports almost no profit.
That is at least partly because it pays hefty fees to its immediate parent Amazon Europe Holding Technologies SCS (AEHT), a tax exempt partnership, in return for using Amazon intellectual property.
The Commission said it was investigating a 2003 deal between Amazon and Luxembourg that underpins this arrangement.
Explaining how the alleged tax avoidance worked, Mr Almunia said: "The Amazon subsidiary in Luxembourg records most of the group's Europe profit. It pays a royalty to another entity in Luxembourg.
"At this stage we consider the amount of this royalty, which lowered the taxable profits of Amazon, was not in line with market conditions. Luxembourg agreed to limit the amount subject to tax."
But in a statement, Amazon said it had "received no special tax treatment from Luxembourg".
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