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BRUSSELS: Luxembourg took just two weeks to sign off a partly cosmetic deal that allowed Amazon to shift a large part of its European profits to an untaxed entity, according to EU antitrust regulators.
The European Commission, which rules on competition and subsidies in the European Union, announced in October that it had opened an investigation into a tax ruling struck in 2003 and published details of its case on Friday.
The investigation, one of a number into large international companies, focuses on whether Luxembourg broke EU state aid rules by allowing Amazon to operate almost tax-free in Europe.
Such inquiries have raised questions for European Commission President Jean-Claude Juncker, former long-time prime minister of Luxembourg, over his role in the country's tax policies.
The document released on Friday described the online retailer's structure, with a Luxembourg company functioning as the headquarters of its European operations and operator of all its European websites.
The net turnover of that company, which it called LuxOpCo, was 13.6 billion euros ($15.8 billion) in 2013, about a fifth of worldwide sales of $74.5 billion.
The Commission's inquiry centres on the relationship between LuxOpCo, pooling revenue from Amazon's EU websites, and Lux SCS, which received a royalty from LuxOpCo and was not subject to Luxembourg tax.
The report said it had doubts whether the transfer pricing agreed by Luxembourg for Amazon reflected what a prudent independent operator would have accepted under normal market conditions.
RAPID RULING
The Commission further noted that the ruling requested by Amazon was assessed and accepted within just 11 working days.
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European Union says part of Amazon's Luxembourg tax deal "cosmetic"
A 23-page letter from Competition Commissioner Joaquin Alumina to the Luxembourg foreign ministry says: The commissions preliminary view is that the tax ruling of 5 November 2003 by Luxembourg in favour of Amazon constitutes state aid.
The letter reveals that it took Luxembourg just 13 days from Amazons request for special status on 23 October 2003 to its being approved on 5 November.
The EU said: The commission is of the opinion that through the contested tax ruling the Luxembourgish authorities confer an advantage on Amazon.
An Amazon spokesman said it had received no special tax treatment from Luxembourg.
The Commission is also investigating whether a unit of Italian carmaker Fiat benefited from unfair state aid to the detriment of competitors as a result of its tax arrangements with the tiny duchy.
It is separately probing deals between Apple and Ireland and Starbucks and the Netherlands.
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European Union hits out at Luxembourg and Amazon over tax deal