The European Commission announced another investigation into arrangements in place for a large multi-national in a Member State. This time the investigation focuses on corporate income taxes paid by Amazon in Luxembourg.

The Commission is investigating a 2003 tax ruling issued by Luxembourg which allows Amazon EU Sárl pay a tax deductible royalty to a Luxembourg limited liability partnership, which is not subject to corporate tax in Luxembourg. According to the Commission, the result of this ruling is that most of the European profits of Amazon, although held in Luxembourg, are not taxed in Luxembourg. The investigation by the Commission will seek to determine whether the 2003 ruling constitutes state aid. The Commission has clearly stated that the general tax regime of Luxembourg is not under investigation.

This investigation is the fourth in-depth investigation into specific tax rulings in the context of transfer pricing. Readers will be familiar with the opening of three transfer pricing investigations in June 2014 (Ireland – Apple, The Netherlands – Starbucks, Luxembourg – Fiat Finance and Trade). A State Aid investigation into Gibralter tax rulings is also underway.