EU watchdog targets Amazon's Luxembourg tax deals

Amazon's tax arrangements with Luxembourg are being investigated by EU regulators, as the online retailer becomes the latest global company to be accused of striking tax-minimising deals with member states that may break bloc rules.

Corporate tax avoidance has come under the spotlight on both sides of the Atlantic in recent years, as perfectly legal deals with authorities help companies save millions of dollars but which critics say is a form of subsidy at ordinary taxpayers' expense.

The European Commission is examining whether Luxembourg broke EU state aid rules by agreeing a deal which allows Amazon to operate almost tax free in Europe.

Amazon is structured so that all online sales in Europe are technically between customers and a Luxembourg company. Despite racking up almost 14 billion euros of sales each year, Amazon's main European subsidiary, Amazon EU Sarl, reports almost no profit.

That is at least partly because it pays hefty fees to its immediate parent Amazon Europe Holding Technologies SCS (AEHT), a tax exempt partnership, in return for using Amazon intellectual property.

The Commision said it was investigating a 2003 deal between Amazon and Luxembourg that underpins this arrangement. The Commission said the agreement could give Amazon an economic advantage over other companies without such rulings.

The U.S. company denied receiving preferential treatment.

"Amazon has received no special tax treatment from Luxembourg, we are subject to the same tax laws as other companies operating here," it said in a statement.

U.S. BATTLE

Luxembourg's finance ministry said there was no wrongdoing.

"Luxembourg is confident that the allegations of state aid in this case are unsubstantiated and that the Commission investigation will conclude that no special tax treatment or advantage has been awarded to Amazon," it said in a statement.

Amazon is already locked in a court battle with the U.S. Internal Revenue Service over the arrangement by which the Luxembourg partnership came to enjoy the rights to sell on Amazon's intellectual property outside the United States.

In court filings, Amazon has denied undercharging AEHT for these rights.

Companies found guilty of breaching EU rules on state aid could be forced to repay what Brussels determines to have been the amount of support given.

Amazon joins fellow U.S. company Apple in the Commission's sights after the watchdog accused Ireland of swerving international tax rules in its tax arrangements with the iPhone maker.

The Commission is also investigating similar deals between coffee chain Starbucks Corp and the Netherlands and Luxembourg tax rulings received by a subsidiary of Italian carmaker Fiat.