Amazon gets bill for back taxes

The European Union has hit Amazon with a tax bill.



The online giant was ordered to pay 250 million euros ($294 million) plus interest in back taxes to Luxembourg on Wednesday after the European Commission said the retailer had received illegal tax benefits.



"Luxembourg gave illegal tax benefits to Amazon. As a result, almost three quarters of Amazon's profits were not taxed," Margrethe Vestager, the EU's commissioner for competition, said in a statement.



The Commission says Amazon received tax advantages between 2006 and 2014 in the country without any "valid justification." During that time, Amazon was shifting its profits from a company that was subject to tax in Luxembourg to another one that wasn't subject to tax, known as the "holding company." Only the first company paid taxes in Europe, while the latter had no employees, no offices and no business activities. Vestager said the arrangement, which did not reflect economic reality, resulted in a much lower tax bill.



Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules," she said. "This is illegal under EU state aid rules. Member states cannot give selective tax benefits to multinational groups that are not available to others."



For its part, Amazon said that it "paid tax in full accordance with both Luxembourg and international tax law."

"We will study the Commission's ruling and consider our legal options, including an appeal," the company said in a statement.



The EU is also set to rule on McDonald’s Corp.’s tax affairs in Luxembourg in the coming weeks, according to a report by Bloomberg, and a general attack on special tax deals that EU countries offer big corporations is also in the works.