EU will continue Amazon tax probe despite change to sales reporting

Amazon announced yesterday that it is now recording retail sales made to customers through its branches in the UK, Germany, Spain and Italy, rather than through Luxembourg. The change began on 1 May, the company said.

Speaking at a European commission press conference, EU competition spokesman Ricardo Cardoso said the announcement makes no difference to the on-going investigation into Amazon's tax ruling in Luxembourg.

The European Commission announced in January that it was conducting an "in-depth investigation" into Amazon's tax arrangements in Luxembourg, saying that these may have counted as illegal state aid.

The investigation is considering a ruling granted by Luxembourg in November 2003 concerning the royalty payable by Amazon's EU operating company, Amazon EU Sarl. The royalty is paid to a Luxembourg partnership of which two Amazon US companies are members. However, it is not taxable in Luxembourg and the Commission said it may not be subject to tax in the US either.

"The investigation will continue examining concerns that the agreement with Luxembourg is providing the company with a selective advantage," Cardoso said.

"We will consider the announced changes to Amazon's tax structure, but these do not affect the state investigation regarding the potential advantage received in the past through the tax ruling," he said.

Tax rulings are 'comfort letters' from national tax authorities giving companies clarity on how their corporate tax will be calculated or on the use of special tax provisions. They are often used to confirm transfer pricing arrangements; which refer to the prices charged for commercial transactions between various parts of the same group of companies.

If used to provide selective advantages to a specific company or group of companies, tax rulings may involve state aid within the meaning of EU rules. These rules are intended to prevent the distortion of competition caused by national governments granting advantages or incentives to particular companies. If the Commission finds that state aid rules have been breached, any company found to have benefited can be ordered to pay back illegal reliefs granted over a period usually up to 10 years.