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", Commissioner Margrethe Vestager in charge of competition policy said.

Dutch tax rulings may have allowed the company to pay less in tax and have an unfair advantage over competitors, the commission said in a statement.

Last month the Commission launched an investigation into a British tax exemption for multinational companies set up by the then-Conservative-led government in 2013 to attract companies to set up headquarters in Britain.

In relation to the 2006 ruling, an annual licence fee was paid by Inter IKEA Systems to I.I. Holding in Luxembourg. The money has allegedly been illegally shifted to Luxembourg and Liechtenstein, where IKEA pays less or no tax.

The method of calculating the license fee was endorsed by a 2006 private Luxembourg tax ruling, one of the two rulings that are the subject of today's announcement. The famed furniture retailer is the latest target in an European Union crackdown on the sweetheart tax avoidance deals that national governments offer to lure multinational corporations to their countries. Systems bought the IP rights formerly held by Holding, using an intercompany loan from its Lichtenstein parent company. The company has a main office in the Netherlands, but also circulates its profits to Liechtenstein and Luxembourg.

As such, this is a historical element of the case and not part of the investigation, the Commission said.

A probe into Ikea, one of Europe's best-known brands, may ease criticism Vestager has received for focusing on how USA companies reduce taxes. It also endorsed the interest to be paid under loan to the parent company and the deduction of these interest payments from Systems' taxable profits in the Netherlands.

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The Commission has recently ordered firms including various member states to collect billons of euros' worth of back taxes from Apple, Starbucks, Amazon and Fiat.

European competition commissioner Margrethe Vestager said: 'Countries can not just allow selected companies to pay less tax.

I.I. Holding paid no corporate tax in Luxembourg because of Luxembourg tax rules in place at the time.

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". Following global recognition that the worldwide tax system needed to be reformed to prevent BEPS, the G20 asked the OECD to recommend possible solutions.

The Commission will also assess whether the price Inter IKEA Systems agreed for the acquisition of the intellectual property rights and consequently the interest paid for the intercompany loan, endorsed in the 2011 tax ruling, reflect economic reality.

The Commission said it will assess whether the remuneration sanctioned under the second tax ruling reflects economic reality.

(Copyright © 2015. All Rights Reserved.)
 
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