The European Commission (EC) has ordered online retail giant Amazon to pay €250 million in back tax to Luxembourg.
The commission, after investigation, ruled that Amazon had received illegal tax benefits. According to the EC, Amazon received tax breaks between 2006 and 2014.
Amazon, in a statement, rejected the EC’s ruling and may appeal.
"We believe that Amazon did not receive any special treatment from Luxembourg and that we paid tax in full accordance with both Luxembourg and international tax law. We will study the commission’s ruling and consider our legal options, including an appeal,” the release said.
Amazon created European operating headquarters Amazon EU Sarl, which pays a royalty to the parent company in Europe for use of intellectual property. But that parent company, a limited liability partnership, is not subject to corporate tax in Luxembourg.
The commission alleged that Amazon was using Luxembourg as its European hub.
This led to Amazon paying €16.5 million in tax on European revenues of €21.6 billion in 2016.
Luxembourg has been implicated in previous tax-related probes involving U.S. technology companies regarding tax affairs and antitrust. The commission is currently reviewing tax deal between McDonald'sand Luxembourg.
The European Commissioner for Competition Margrethe Vestager said the labeled the practice as illegal.
Just last year, Ireland was instructed to recover 13 billion euros in back taxes from Apple. Vestager highlighted that the back taxes are yet to be paid over.
Know it may be difficult, but more that 1 year after Apple decision, tax benefits not recovered by Ireland. We ask EU court to look into it.— Margrethe Vestager (@vestager) October 4, 2017
Following the decision, Chief Executive Tim Cook slammed the ruling as "total political crap."
Search engine magnate, Google was fined earlier this year and asked to fork out a whopping €2.4 billion or $2.7 billion, a record antitrust fine — which topped the €1.06 billion Intel 2009 fine.
The European Union (EU) is set to carry out investigations into tax arrangements between multinationals and its member countries.
The EU's investigation has also incorporated Amazon's subsidiaries and the practice of transfer pricing – the price of goods that one subsidiary of a company sells to another subsidiary under the same corporation. It becomes illegal if this transfer of goods is mispriced, which would be affecting the company's profits and how much tax it pays.