Amazon has an unpaid tax bill totaling €250 million, says the European Commission, which has ordered the company to pay up. The online retailer managed to avoid a large portion of taxes with an allegedly illegal tax deal in Luxembourg. Its deal with the country, which began in 2003, enabled Amazon to move its taxable profits to the most favorable jurisdiction.
Luxembourg violated rules on state aid by letting Amazon engage in a "transfer pricing" scheme. Its Luxembourg subsidiary, Amazon EU SARL, would pay inflated royalties to a separate subsidiary that wasn't subject to corporate tax.
The Commission's investigation showed that the level of the royalty payments, endorsed by the tax ruling, was inflated and did not reflect economic reality. On this basis, the Commission concluded that the tax ruling granted a selective economic advantage to Amazon by allowing the group to pay less tax than other companies subject to the same national tax rules,- EU Commission
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