Amazon Inc (NASDAQ:AMZN) has won an appeal over its European tax bill. The European Commission had ordered the online retailer to pay €250 million (US$303 million) in back taxes to Luxembourg. However, the European Union’s general court ruled that the commission didn’t prove that the country had given Amazon an illegal tax advantage.
The e-commerce giant's European subsidiary is located in Luxembourg. Its tax structure established in 2006 allows it to funnel all its EU revenue into its Luxembourg subsidiary.
EU sides with Amazon over tax bill
The European Commission said in 2017 that Luxembourg had granted illegal tax benefits to Amazon. At the time, it said the nation allowed the online retailer to pay four times less tax than other local companies subject to the same national rules. However, Amazon appealed that ruling. The European Commission may still appeal this latest court ruling, taking the case to the EU's highest court, the European Court of Justice.
The commission ruled that Amazon's tax structure was illegal in 2017 and that Luxembourg allowed nearly three-quarters of the company's profits not to be taxed. The Verge explains that the company's most recent financial filings show €44 billion (US$53 billion) in revenue for its Luxembourg subsidiary. However, the subsidiary also reported €1.2 billion in losses, which meant that Amazon didn't pay any corporate taxes in Europe.
According to The Verge, after the details of Amazon's Luxembourg subsidiary and tax structure were revealed, the U.S. Internal Revenue Service filed its own case against the online retailer, attempting to force it to pay up to $1.5 billion in back taxes. However, a federal judge rejected the case in 2017, describing the amount as "arbitrary, capricious and unreasonable."
Not the first such ruling in Europe
According to CNBC, the EU's ruling in Amazon's favor is the second such ruling in less than a year. In July, the EU said Margrethe Vestager's team did not prove that the Irish government had granted illegal tax benefits to Apple.
The commission had ordered the iPhone maker to pay back some €13 billion in unpaid taxes in 2016. It decided to take Apple's case to the European Court of Justice and started looking at ways to beef up its toolkit to fight back against what it says is unfair competition.
European lawmakers are now debating a pair of bills that could bring sweeping changes to tax law in the EU. The proposals would enforce practical changes instead of fines for countries that repeatedly break the law.
Amazon is part of the Entrepreneur Index, which tracks 60 of the largest publicly traded companies managed by their founders or their founders' families.