Online retail giant Amazon has been ordered to pay Euro 300 million (or around Rs 2,300 crore) in back taxes to Luxembourg after the European Commission found that the company had received tax benefits that it was not entitled to.
Regulators said Amazon received tax breaks between 2006 and 2014 in Luxembourg without any "valid justification."
"Luxembourg gave illegal tax benefits to Amazon. As a result, almost three quarters of Amazon's profits were not taxed," Margrethe Vestager, the EU's commissioner for competition, said in a statement.
"In other words, Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules. This is illegal under EU state aid rules. Member states cannot give selective tax benefits to multinational groups that are not available to others," she added.
From June 2014, Amazon changed the way it operates in Europe and the new structure is outside the EU Commission's authority on state aid.
Investigations showed that Amazon was shifting its profits from a company that was subject to tax in Luxembourg to another one that wasn't subject to tax, known as the "holding company", which had no employees, no offices and no business activities.
Luxembourg authorities said they have taken notice of the decision and will "use appropriate due diligence to analyze the decision." They said the Commission’s decision refers to 2006. “Over time, both the international and the Luxembourg legal frameworks have substantially evolved," they said.
Responding to the Commission’s decision, Amazon said that it did not receive any special treatment from Luxembourg and 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. Our 50,000 employees across Europe remain heads-down focused on serving our customers and the hundreds of thousands of small businesses who work with us," the online retailing giant said in a statement.
The probe into Amazon’s tax arrangements with Amazon began in October 2014, amid a string of probes into US companies by the Commission.
Last year, the EU ordered Ireland to recover 13 billion euros in taxes from Apple. The commission is also looking into the tax deal between McDonald's and Luxembourg.
