The General Court of the European Union on Wednesday 12 May annulled the Commission’s decision of October 2017 that the tech giant Amazon had benefited from an advance tax ruling between 2006 and 2014 constituting illegal State aid under EU law and valued at €250 million (Case T-318/18 and T-816/17) (see EUROPE 11876/13).
Basically, the Luxembourg tax ruling in question had endorsed the transfer of a large part of the profits of the operating company Amazon EU, the company responsible for the group’s commercial activities in Europe, to the holding company Amazon Europe Holding Technologies (LuxSCS) by means of a royalty on intellectual property rights. During the relevant period, this company, which had no office or employees, acted as an intermediary between Amazon EU and the controlling company in the United States to transfer the intellectual property rights to the operating company.
According to the General Court, none of the findings—one main and three subsidiary—made by the Commission in the decision contested by Amazon and Luxembourg is sufficient to demonstrate the existence of operating aid incompatible with the internal market (Article 107 of the TFEU).
In particular, the European Court found that the main finding of undue advantage is based on a flawed analysis. Thus, it considered that the Commission could not assert that LuxSCS was a mere passive holder of the intangible assets concerned, as the European institution had not duly taken into account the functions performed by LuxSCS for the purpose of exploiting these assets nor the risks assumed by this company.
In a press release, the Luxembourg authorities welcomed the General Court’s judgment “which confirms that the tax treatment of the taxpayer in question, in accordance with the tax rules applicable at the time, does not constitute State aid”.
After the invalidation in July 2020 of the decision ordering Ireland to recover €13 billion in tax benefits granted to Apple (see EUROPE 12528/1), this judgment is the second major setback for the Commission in its hunt for tax rulings providing illegal advantages to large groups eager for tax optimisation.
The Commission’s Executive Vice-President for Competition, Margrethe Vestager, promised that the judgment would be carefully analysed before deciding whether to appeal to the Court of Justice, as in the Apple case. She recalled in passing that Luxembourg’s advance tax ruling had allowed Amazon to avoid paying tax on “three quarters of the profits” made between 2006 and 2014.
“The Commission is using all tools at its disposal to fight unfair tax practices. State aid enforcement works hand in hand with the EU’s legislative action to address loopholes and ensure transparency in fiscal matters”, Ms Vestager added in a statement.
See the judgment (in French): https://bit.ly/3y5fvvH (Original version in French by Mathieu Bion, with Lionel Changeur)