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Luxembourg’s approval of Amazon’s transfer pricing arrangements probably amounted to illegal state aid, according to the European Commission in a document addressing the grand duchy.
The 23-page paper asks Luxembourg tax officials to provide more information on the background to their agreements with the retail giant, and warns that all “unlawful aid may be recovered from the recipient”.
Luxembourg’s approval of Amazon’s transfer pricing arrangements probably amounted to illegal state aid, according to the European Commission in a document addressing the grand duchy.
The 23-page paper asks Luxembourg tax officials to provide more information on the background to their agreements with the retail giant, and warns that all “unlawful aid may be recovered from the recipient”.
Heather Self, partner at law firm Pinsent Masons, said the document highlighted the “speed with which Luxembourg’s tax ruling was granted: within 11 days of the request”.
It also showed the central European country had not provided the EC with a transfer pricing report submitted by Amazon to local tax authorities – which the commission suggested, was “evidence that the arrangements were not held up to proper scrutiny”.
Self added, “As with the investigation into Apple’s transfer pricing arrangements in Ireland, the commission also took issue with the length of the agreement on the transfer pricing arrangements”. These were unrevised for ten years, despite changes to the economic environment, while comparable arrangements in other European countries typically last no longer the five.
“Any company that has struck a favourable tax agreement with Luxembourg in the past should already be reviewing it. Given the European Union’s determination in pursuing these cases, and the plans for national tax authorities to share the details of similar rulings, companies should be prepared for far closer examination of their transfer pricing arrangements in the future,” Self warned.
