The Court of Justice of the European Union has issued a decisive ruling in favor of the American e-commerce giant Amazon, settling a longstanding dispute with the European Commission regarding tax breaks totaling EUR 250 million granted by Luxembourg.
After months of legal proceedings, the final court instance of the Court of Justice of the European Union (CJEU) dismissed the European Commission’s (EC) complaint, which was filed in 2021. The case centered on the legality, under EU regulations, of an agreement forged in 2003 and extended in 2011 between Amazon and the authorities of Luxembourg.
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 By a tax ruling of 2003, the Luxembourg authorities accepted the Amazon group’s proposal concerning the treatment of two of its subsidiaries established in Luxembourg for the purposes of Luxembourg corporate income tax. By a decision of 2017, the Commission found that that tax ruling constituted a State aid that was incompatible with the internal market. According to the Commission, the account taken of a royalty that one of those two subsidiaries had paid to the other under a licence agreement concluded between them on the use of intangible assets artificially diminished the tax base of the first subsidiary and, ultimately, that of the Amazon group in Luxembourg and in Europe.” states an official release from the the Court of Justice of the European Union.
As a result of this agreement with Luxembourg, Amazon managed to save EUR 250 million in taxes. According to the terms, Amazon established its European headquarters in Luxembourg and fulfilled its tax obligations there.
Leveraging reduced rates, the company was able to transfer nearly 75 percent of its earned profits from all EU countries to the United States. The European Commission contended that, due to these governmental concessions, Amazon had evaded paying approximately EUR 250 million in owed taxes and sought a reimbursement of the amount along with interest.
This marks another setback for the European Commission in its legal battles over tax discrepancies with international corporations. The ongoing struggle reflects a dichotomy in approach – one involving a strategy to minimize taxes to enhance budget revenues in countries hosting corporate operations, while simultaneously encouraging investments through tax incentives, targeted subsidies, job creation grants, and various other financial inducements.