Vestager orders Amazon to pay €250 million in back taxes

‘Almost three-quarters of Amazon’s profits were not taxed,’ says European commissioner for competition.

The European Commission told Luxembourg Wednesday to claw back some €250 million from Amazon, after ruling a 2003 tax deal between one of Europe’s lowest tax jurisdictions and the e-commerce titan amounted to illegal state aid.

“Almost three-quarters of Amazon’s profits were not taxed,” said Margrethe Vestager, the European commissioner for competition. “In other words, Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules.”

Investigators concluded that the 2003 deal allowed Amazon to attribute the vast bulk of its EU profits between 2006 and 2014 to a holding company, a complicated corporate entity that was not liable to pay taxes in Europe. That was approved by Luxembourg’s tax authorities despite the holding company, Amazon Europe Holding Technologies, having “no employees, no offices and no business activities.”

The Commission labeled the holding company an “empty shell.”

The verdict follows last year’s order that Apple pay €13 billion to Ireland and is a clear sign that Vestager is determined to pursue her campaign against shadowy tax arrangements between national capitals and multinationals.

The move risks stoking debate with Washington, which says her inquiries target profits taxable in the U.S., and exacerbating deep divisions between EU countries over tax.

Both Luxembourg and Amazon have long denied wrongdoing and are likely to appeal.

“Luxembourg will use appropriate due diligence to analyze the decision and reserves all its rights,” the country said in a statement.

And the U.S. tech giant said Wednesday it had not received preferential tax treatment in Luxembourg and that it had complied with all international tax rules.

“Our 50,000 employees across Europe remain heads-down focused on serving our customers and the hundreds of thousands of small businesses who work with us,” Amazon said.

Mark Scott contributed reporting.