Amazon notched a win in a fractious battle with the EU regarding its tax relationship with Luxembourg, its European headquarters.
Arriving in 2003, Amazon established its European head office in Luxembourg, well known as an offshore tax haven offering preferential tax arrangements to multinational enterprise. Luxembourg is famed for its business opacity, and was referred to as the “Death Star of financial secrecy” by the Tax Justice Network some ten years ago.
Amazon celebrated 20 years in Luxembourg last year, commemorating its investment in the community and its growth from one to seven corporate offices in Kirchberg. In the meantime, the European Commission alleged in 2017 that Amazon was receiving illegal tax perks in Luxembourg, more specifically that the tax arrangement between Amazon and Luxembourg amounts to the provision of state aid to the company.
In 2017, the EU tagged Amazon with an approximately $273M bill to cover what it considered to be state assistance to the enterprise. In 2021, the EU General court ruled for Amazon, noting that the EU had not met “the requisite legal standard that there was an undue reduction of the tax burden of a European subsidiary of the Amazon group.”
Following an appeal by the EU, in December 2023 the European high court, the Court of Justice, supported the earlier ruling that the EU simply had not made its case. In a media statement, the court stated, “The Court of Justice confirms that the Commission has not established that the tax ruling given to Amazon by Luxembourg was a State aid that was incompatible with the internal market.” The ruling of the court is final.
Of its win, Amazon said, “We welcome the Court’s ruling, which confirms that Amazon followed all applicable laws and received no special treatment.”
The ruling is a setback for the European bloc as it struggles to reduce tax fraud and increase the transparency of money flowing through the EU and around the world. Progress on measures to stem tax avoidance have proceeded in fits and starts, but January 1, 2024 marked the go-live date for the new global minimum corporate tax rate of 15 percent. With approximately 140 tax jurisdictions signed on to the framework, more are expected in the years ahead.
The discussion—legal and regulatory—continues. We will keep you posted.
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