A European Union court has annulled a ruling by the European Commission that a tax deal between the Luxembourg government and Amazon amounted to illegal state support.
The European Commission ordered the US online retailer in 2017 to pay around €250 million in back taxes to Luxembourg.
But judges at the EU’s General Court said the European Commission did not prove “to the requisite legal standard that there was an undue reduction of the tax burden of a European subsidiary of the Amazon group”.
Amazon said in a statement that it welcomed the court’s decision, which is “in line with our long-standing position that we followed all applicable laws and that Amazon received no special treatment”.
#EUGeneralCourt : Lack of a selective advantage in favor of a #Luxembourg subsidiary of the @amazon group - annulment of the @EU_Commission decision declaring the aid incompatible with the internal market #StateAid
👉https://t.co/ATb3CgbPxgAdvertisement— EU Court of Justice (@EUCourtPress) May 12, 2021
“We’re pleased that the court has made this clear, and we can continue to focus on delivering for our customers across Europe.”
The European Commission’s decision related to Luxembourg’s tax treatment of two companies in the Amazon group: Amazon EU and Amazon Europe Holding Technologies.
Margrethe Vestager, the EU official in charge of antitrust issues, argued at the time that Amazon had unfairly profited from special low tax conditions since 2003 in Luxembourg, where its European headquarters are based.
As a result, almost three quarters of Amazon’s profits in the EU were not taxed, she said.
Both Luxembourg and Amazon challenged the decision with the EU’s General Court.
The EU has taken aim at deals concluded between individual countries and companies used to lure foreign multinationals in search of a place to establish their EU headquarters.
The practice led to EU states competing with each other and multinationals playing them off one another.
Judges at the General Court have backed the European Commission in several cases, but the EU’s efforts to crack down on favourable tax deals suffered recent setbacks in cases involving Starbucks and Apple.
#EUGeneralCourt : #TaxRulings granted by #Luxembourg to companies in the @ENGIEgroup - the General Court finds the existence of a #tax advantage #StateAid 👉https://t.co/ATb3CgbPxg
— EU Court of Justice (@EUCourtPress) May 12, 2021
Wednesday’s ruling can be appealed against at the EU's highest court, the European Court of Justice.
The EU remains at odds with Amazon on other issues relating to competition.
Last year, EU regulators filed antitrust charges against the e-commerce company, accusing Amazon of using its access to data from companies that sell products on its platform to gain an unfair advantage over them.
In another judgment on Wednesday, the General Court found the existence of a tax advantage in rulings granted by Luxembourg to companies in the Engie group, a French multinational electric utility company.
Three years ago, the European Commission had found that Luxembourg allowed two Engie group companies to avoid paying taxes on almost all their profits for about a decade and said the country should recover about 120 million euros (£103 million) in unpaid tax.
The Luxembourg government welcomed the Amazon decision and said in a statement that neither ruling calls into question the country’s “commitment to transparency in tax matters and the fight against tax avoidance practices”.
Last year's the General Court threw out Vestager's order to iPhone maker Apple to pay €13 billion in Irish back taxes. The Commission appealed against that decision in September.
Vestager has, however, successfully made Ireland, Luxembourg, the Netherlands and Belgium change their tax ruling practices, and spurred the Organisation for Economic Cooperation and Development (OECD) to aim for a global deal on how multinational companies are taxed. The OECD said last week that the chances of a global deal had never been higher.
