Amazon/Luxembourg: preliminary decision published

On 16 January 2015, the European Commission published a non-confidential version of a decision taken on 7 October 2014 to open an in-depth investigation into transfer pricing arrangements on corporate taxation of Amazon in Luxembourg. The EU Commission’s preliminary view is that the tax ruling of 5 November 2003 by Luxembourg in favour of Amazon constitutes State aid within the meaning of Article 107(1) TFEU and the Commission has doubts at this stage as to that ruling’s compatibility with the internal market. Moreover, the Commission requested further information from the Luxembourg Government.

The Luxembourg Government pointed out in its press release that “The text published contains no new elements. Luxembourg has submitted all requested information to the Commission and is fully cooperating with the Commission in the investigation. Among others, the detailed transfer pricing reports requested by the Commission have also been provided. Luxembourg is confident that the allegations of State aid in this case are unsubstantiated and that it will be able to convince the Commission in due time of the legitimacy of the tax ruling and that no selective advantage has been granted.”

According to the BBC website, ‘Amazon said it “has received no special tax treatment from Luxembourg”….and …. “We are subject to the same tax laws as other companies operating here [in Luxembourg]’


The European Commission announced, on 7 October 2014, that it has opened an in-depth investigation to examine whether the decision by Luxembourg’s tax authorities with regard to the corporate income tax to be paid by Amazon in Luxembourg comply with the EU rules on State aid.

According to Article 107(1) TFEU, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the provision of certain goods shall be incompatible with the internal market, in so far as it affects trade between Member States.

The qualification of a measure as aid within the meaning of Article 107(1) therefore requires the following cumulative conditions to be met: (i) the measure must be imputable to the State and financed through State resources; (ii) it must confer an advantage on its recipient; (iii) that advantage must be selective; and (iv) the measure must distort or threaten to distort competition and have the potential to affect trade between Member States. Article 107 (1) TFEU also applies in the field of taxation notwithstanding the fact that the competence of the Union to regulate direct taxation is limited under the TFEU26.

The main question in the present case is whether the contested tax ruling confers a selective advantage upon Amazon in so far as it results in a lowering of its tax liability in Luxembourg. If the existence of a selective advantage can be shown, the presence of the other conditions for a finding of State aid under Article 107(1) TFEU is relatively straightforward.

Point 78 of the decision states ‘that advantage is also granted in a selective manner….’ It was concluded that the contested tax ruling fulfils all four conditions under Article 107(1) TFEU. In light of the foregoing considerations, the Commission’s preliminary view is that the tax ruling of 5 November 2003 by Luxembourg in favour of Amazon constitutes State aid within the meaning of Article 107(1) TFEU and the Commission has doubts at this stage as to that ruling’s compatibility with the internal market. For the full text of the decision click on this link.

Selective advantage

I wonder how the recent decisions of General Court of European Union may affect on the Amazon case and the Commission’s argument on selective advantage. On 7 November 2014, the Court annulled the Commission decisions declaring the Spanish tax regime allowing for the deduction of shareholdings in foreign companies to be incompatible with the internal market (Cases: T-219/10 Autogrill España SA v Commission and T-399/11 Banco Santander SA and Santusa Holding SL v Commission)

According to the General Court, the Commission failed to establish that the Spanish regime was selective, selectivity being one of the cumulative criteria for classifying a measure as State aid. The General Court rejected the Commission’s argument that the Spanish regime is selective in so far as it only benefits certain groups of undertakings which make certain investments abroad. The Court pointed out that such an approach could lead to every tax measure the benefit of which is subject to certain conditions being found to be selective, even though the beneficiary undertakings would not share any specific characteristic distinguishing them from other undertakings, apart from the fact that they would be capable of satisfying the conditions to which the grant of the measure is subject.

The General Court recalled that a measure which may confer an advantage on all undertakings without distinction within the State concerned does not constitute State aid as regards the criterion of selectivity, and that a finding of the selectivity of a measure must be based, inter alia, on a difference of treatment between categories of undertakings under the legislation of the same Member State, not a difference in treatment between companies of a Member State and those of other Member States.

The General Court concluded from this that the fact that the measure favours undertakings which are taxable in one Member State as compared to undertakings which are taxable in other Member States (in particular, because the measure facilitates undertakings established in that Member State acquiring shareholdings in the capital of undertakings established abroad) does not affect the analysis of the selectivity criterion and supports only the finding that, depending on the circumstances, competition and trade have been affected. See also our blog post on the Spanish State Aid Case

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