The EU's General Court has overturned a decision by the European Commission ordering Amazon.com to pay EUR 250 million in back taxes to Luxembourg. The Commission failed to prove Amazon benefited from illegal state aid under an advance tax ruling in Luxembourg, the court said.
The original decision was issued in 2017 and appealed by Luxembourg. The Commission had accused the country of violating EU state aid rules by giving Amazon an advantageous advance tax ruling for its subsidiary in the country. The tax ruling was first issued in 2003 and renewed in 2011, and the Commission launched its investigation in 2014.
The company Amazon EU Sarl pays royalties to another Amazon subsidiary in Luxembourg for use of the American company's technology and services for Amazon's business in Europe. The Commission claimed the ruling by Luxembourg's tax authorities allowed excessive royalties under the licensing deal between the subsidiaries, reducing Amazon EU's taxable income. Without this advantage, the company would have paid much more in corporate income tax.
The General Court found that the EU failed to demonstrate the illegal nature of the tax ruling. It found several errors in the Commission's arguments over whether the relationship between the Amazon subsidiaries could be considered arm's length, how the terms of the licensing deal were reached and whether the subsidiary provided actual services commensurate with the royalties.
The Commission may still appeal the case on points of law to the EU's Court of Justice.
