EU court: Amazon tax deal with Luxembourg was legal

In the latest setback to European Union efforts to tackle corporate tax avoidance, a court on Wednesday annulled a ruling by the European Commission that a tax deal between the Luxembourg government and Amazon amounted to illegal state support.

The EU’s executive branch ordered the U.S. online retailer in 2017 to pay around 250 million euros ($300 million) in back taxes to Luxembourg. But judges at the EU’s General Court said the European Commission didn’t prove “to the requisite legal standard that there was an undue reduction of the tax burden of a European subsidiary of the Amazon group.”

Amazon said it welcomed the court’s decision, which is “in line with our long-standing position that we followed all applicable laws and that Amazon received no special treatment,” the company said in a statement. “We’re pleased that the Court has made this clear, and we can continue to focus on delivering for our customers across Europe.”

The European Commission’s decision related to Luxembourg’s tax treatment of two companies in the Amazon group: Amazon EU and Amazon Europe Holding Technologies.

Margrethe Vestager, the EU official in charge of antitrust issues, argued at the time that Amazon had unfairly profited from special low tax conditions since 2003 in tiny Luxembourg, where its European headquarters are based. As a result, almost three-quarters of Amazon’s profits in the EU were not taxed, she said. Vestager didn’t reply immediately to a request for comment.

Both Luxembourg and Amazon challenged the decision with the EU’s General Court.

The EU has taken aim at deals concluded between individual countries and companies used to lure foreign multinationals in search of a place to establish their EU headquarters. The practise led to EU states competing with each other and multinationals playing them off one another.

Judges at the General Court have backed the European Commission in several cases, but the EU’s efforts to crack down on favourable tax deals suffered recent setbacks in cases involving Starbucks and Apple.

Wednesday’s ruling can be appealed to the 27-nation bloc’s highest court, the European Court of Justice.

The EU remains at odds with Amazon on other issues relating to the competition. Last year, EU regulators filed antitrust charges against the e-commerce company, accusing Amazon of using its access to data from companies that sell products on its platform to gain an unfair advantage over them.

In another judgment Wednesday, the General Court found the existence of a tax advantage in rulings granted by Luxembourg to companies in the Engie group, a French multinational electric utility company. Three years ago, the European Commission had found that Luxembourg allowed two Engie group companies to avoid paying taxes on almost all their profits for about a decade and said the country should recover about 120 million euros in unpaid tax.

The Luxembourg government welcomed the Amazon decision and said in a statement that neither ruling calls into question the country’s “commitment to transparency in tax matters and the fight against tax avoidance practices.”