Amazon is having a mixed day on the international tax front.
The e-tail giant and Italy’s tax body, Agenzia delle Entrate, have agreed to end an investigation into allegations that Amazon’s Italian affiliate avoided paying about 130 million euros in taxes, with a deal that will see the company pay 100 million euros, about $117 million.
The Italian authority said the payment will end any “potential controversy” over Amazon’s tax payments and preventative measures have been put in place as well.
An Amazon spokesman confirmed the agreement and characterized it as a deal on “historical matters,” adding that since 2010, the company has added 3,000 jobs in the country.
“In May 2015, to ensure we had the best business structure to serve our customers going forward, we established a local country branch of Amazon EU Sarl in Italy, with all retail revenues, expenses, profits and taxes due now accounted for in Italy,” the spokesman clarified.
The e-tail giant is, however, still dealing with a dispute over allegedly unpaid tax with the European Commission, the regulatory body of the European Union, which says Amazon owes more than 250 million euros in back taxes.
Led by antitrust commissioner Margrethe Vestager, the commission has been working to ensure that the power and growth of online giants like Google, Facebook and Amazon doesn’t go unchecked and that they operate under the same tax scheme as smaller operators.
At the center of the EU’s case against Amazon is an earlier ruling by a court in Luxembourg that allowed the giant e-tailer to cut its tax liability between 2006 and 2014, which the commission now says created an unfair advantage and crossed aid rules for European Union member states.
Specifically, Luxembourg’s ruling allegedly let Amazon shift profits from one operating affiliate, Amazon EU, to a holding company with no physical presence or employees, Amazon Europe Holding Technologies. By paying the holding company royalties from Amazon sales that exceeded 90 percent of Amazon’s profits in the EU, the company was able to lower its tax liability over eight years. Vestager said Amazon avoided tax on nearly three-quarters of its European profits in this way.
But Luxembourg on Friday said it’s decided to appeal the commission’s finding. A statement from the government said Luxembourg doesn’t feel the commission “established the existence of a selective advantage” for Amazon and it disagrees with the analysis on transfer pricing, or the costs applied when a multientity company like Amazon moves supplies from one part to another.
“This appeal seeks to obtain legal certainty, and does not put into question Luxembourg’s strong commitment to tax transparency and the fight against harmful tax practices,” the country added.
Amazon’s spokesman declined to comment on Luxembourg’s move.
Amazon isn’t alone in its European tax hurdles. Earlier this year, Google found itself in a similar situation with Italian tax authorities, accusing the online giant of not paying its full tax burden between 2012 and 2015. Google ended up paying 306 million euros to end the investigation.
The commission also hit Google over the summer with a record 2.4 billion euro fine for allegedly talking “illegal advantages” in the online marketplace by using its dominance as a search engine to ensure its comparative pricing service quells the competition, which, in the commission’s estimation, has “denied European consumers the benefits of competition, genuine choice of service and innovation.”
Google has since filed an appeal of the finding, and a resolution is expected to take years.
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