Short Reads

European Commission orders the recovery of State aid of around EUR 250 million from Amazon

European Commission orders the recovery of State aid of around EUR 25

European Commission orders the recovery of State aid of around EUR 250 million from Amazon

01.11.2017 NL law

On 4 October 2017, after a long investigation, the European Commission held that a tax ruling between Amazon and Luxembourg constituted illegal State aid [see our November 2015 Newsletter]. The Commission ordered Luxembourg to recover this aid from Amazon, which is estimated to be around EUR 250 million.

The Commission explained that the tax ruling in question allowed Amazon to pay substantially less tax than other companies. More specifically, the Commission stated that the tax ruling enabled Amazon to shift the vast majority of its profits from an Amazon group company (Amazon EU) to another company (Amazon Europe Holding Technologies). Amazon EU is subject to taxation in Luxembourg while Amazon Europe Holding Technologies is not. As a limited partnership, only the partners of Amazon Europe Holding Technologies are subject to taxation. These partners are located in the US and have so far deferred their tax liability.

Amazon EU operates Amazon's retail business in Europe. Amazon Europe Holding Technologies does not have any employees or offices, nor does it carry out any business activities. The holding company is an intermediary between Amazon EU and Amazon in the US. It has intellectual property rights and grants its exclusive use of these rights to Amazon EU. Under the tax ruling, Amazon EU paid royalties to Amazon Europe Holding Technologies, as a result of which Amazon EU's taxable profits were substantially reduced.

The Commission decided that the royalty payments did not reflect the economic reality. According to the Commission, the holding company did not perform any activities to justify the level of the royalties received since it was not involved in the management, development or use of its intellectual property. The royalty payment was therefore contrary to the so-called "arm's length principle" under which payments between two companies in the same group should be in line with arrangements that take place under commercial conditions between independent businesses.

The non-confidential version of the decision has not been published yet. Therefore, the exact methodology used to calculate the illegal advantage enjoyed by Amazon is not fully known. The tax authorities in Luxembourg will use this method to determine the exact amount of the State aid that has to be recovered from Amazon.

This article was published in the Competition Law Newsletter of November 2017. Other articles in this newsletter:

  1. General Court annuls UPC/Ziggo merger decision
  2. General Court rules that luxury watchmakers can limit supply of parts to approved repairers
  3. General Court upholds fine for 'gun jumping' EU merger control procedure
  4. Nike can restrict sales via online platforms within its selective distribution system
  5. Dutch Trade and Industry Appeals Tribunal rules on cover pricing
  6. KLM and Amsterdam Schiphol airport offer commitments to reduce competition concerns

Team

Related news

30.04.2019 EU law
Climate goals and energy targets: legal perspectives

Seminar - On Tuesday April 30th, Stibbe organizes a seminar on climate goals and energy targets. Climate change has incited different international and supranational institutions to issue climate goals and renewable energy targets. Both the UN and the EU have led this movement with various legal instruments.

Read more

21.03.2019 NL law
15 aspects of Brexit you did not know

Short Reads - A Brexit without a deal, or with a deal that does not cover all relevant aspects, is still a potential scenario. We have highlighted a number of unexpected legal consequences of Brexit in such a no deal or incomplete deal scenario.

Read more

15.03.2019 EU law
European Court of Justice issues landmark ruling on parental liability

Short Reads - On 14 March the European Court of Justice issued a landmark judgment in the Skanska case. In this ruling, the Court of Justice held that parent companies can be held liable for the damage caused by a competition infringement committed by their subsidiary if the parent company (that holds all the shares in the subsidiary) has dissolved the subsidiary but continued its economic activity.

Read more

01.03.2019 NL law
Does selling a phone on an online marketplace make you a "trader" under the Unfair Commercial Practices Directive and the Consumer Rights Directive?

Short Reads - Online marketplaces provide sales channels not only for professional traders but also for individuals selling second-hand goods. For buyers, online advertisements do not always make it clear whether the seller is a professional trader or an individual. This distinction is important because consumers buying from a professional trader can benefit from EU consumer laws, while these protections do not apply in consumer-to-consumer sales.

Read more

Our website uses cookies: third party analytics cookies to best adapt our website to your needs & cookies to enable social media functionalities. For more information on the use of cookies, please check our Privacy and Cookie Policy. Please note that you can change your cookie opt-ins at any time via your browser settings.

Privacy – en cookieverklaring