EU antitrust regulators investigate Luxembourg’s tax treatment of McDonald's

The European Commission has opened a formal probe on tax deals between Luxembourg and McDonald's, which was able to evade tax through it.

Telegraph UK reported that the European legislative body will examine if the U.S. fast food giant was given advantageous tax treatment that violates state aid rules. The Luxembourg-US Double Taxation Treaty exempts McDonald's from paying income tax in Europe, but is required to pay the taxes from its revenues to the United States. According to the legislative body, McDonald's Europe Franchising has "virtually not paid any corporate tax in Luxembourg nor in the US on its profits since 2009"

Before McDonald's the European Commission also ordered Fiat Chrysler Automobiles was asked to pay a fine of 30 million euros, or $32 million, to Luxembourg for unlawful aid from their tax deals. The same was done for Starbucks in Netherlands.

In an interview with Reuters, the EU competition enforcer Commissioner Margrethe Vestager said, "We decided to open an investigation into two Luxembourg tax rulings to McDonald's because we have the concern that those two rulings have resulted in... double non-taxation, and that may be state aid."

Multinational corporations typically use tax ruling to clarify their future tax bills, but the bloc's top antitrust regulator worry that some company may have taken advantage of it to underpay taxes. In a report by The Wall Street Journal, Luxembourg's government agreed to cooperate with the investigation and said that it did not give any special tax treatment or any advantages for McDonald's.

Meanwhile, McDonald's said Thursday that it complies with European tax laws and rules and is confident that the investigation will be favorable to them. The fast food giant said in a statement, "From 2010-2014, the McDonald's Companies paid more than $2.1 billion just in corporate taxes in the European Union, with an average tax rate of almost 27%."

Vestager said they will look at the tax arrangement very carefully. She said the treaty is to help companies avoid double taxation, "not double non-taxation."