European Union Investigating Tax Affairs of Ikea

European Union Investigating Tax Affairs of Ikea

Member states can not let selected companies pay less tax by allowing them to artificially shift their profits elsewhere.

The commission has previously investigated tax avoidance structures of multinational companies, including Apple, Starbucks and Amazon.

The Commission has said that Inter Ikea, based in the Netherlands, one of the two divisions of the Swedish giants, might have received tax advantages from the Netherlands that were unfair. Inter-Ikea Holding holds the trademark rights to Ikea and, like the Ikea Group owns a foundation. The EU is investigating if this mechanism is a device to enable Ikea to avoid paying tax on part of its profits.

Between 2006-2011, the Netherlands subsidiary paid annual licence fees to a related Luxembourg company, I.I. Holding, which were likely deductible in the Netherlands.

Then in 2011, after the Luxembourg tax scheme was deemed illegal, Inter Ikea arranged a second tax ruling with the Netherlands.

"The Commission considers at this stage that the treatment endorsed in the two tax rulings may have resulted in tax benefits in favour of Inter IKEA Systems, which are not available to other companies subject to the same national taxation rules in the Netherlands". The Dutch subsidiary financed the acquisition by taking out a loan from its Liechtenstein parent.

In a similar Dutch case, the European Union decided against coffee-shop chain Starbucks in the Netherlands and ordered the latte and espresso-maker to pay roughly 30 million euros in back taxes.

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"All companies, big or small, multinational or not, should pay their fair share of tax", said EU Competition Commissioner Margarethe Vestager on Monday.

The Commission's investigation concerns the tax treatment of Inter IKEA Systems in the Netherlands since 2006. It also endorsed the interest to be paid under the intercompany loan to the parent company in Liechtenstein, and the deduction of these interest payments from Inter IKEA Systems' taxable profits in the Netherlands.

Your local High Street furniture store has enough trouble competing with the likes of Ikea, with its massive stores, name recognition, buying power and marketing budget, without Ikea also having access to tax breaks that it could never use.

In April, the Commission ordered Amazon to pay €250m (£221m) in back taxes to the Luxembourg government after ruling that a 2003 tax deal amounted to illegal state aid.

In 2011, IKEA restructured as the Commission ruled in 2006 that the Luxembourg special tax scheme breached state aid rules. In particular, it will assess if the level of the annual license fee reflects Inter IKEA Systems' contribution to the franchise business.

Probe centres around two Dutch rulings that EC believes may have given IKEA "an unfair advantage over other companies, in breach of EU State aid rules". The Netherlands, said the official, supports the work of the Commission.

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