The Court of Justice of the European Union (CJEU) has scrapped a €250 million tax bill for Amazon.

European Commission boss Margrethe Vestager is attempting to crack down on sweetheart deals between multinational corporations and EU countries, and had targeted Amazon’s relationship with Luxembourg by ordering it to pay €250 million in back taxes to the country.

The CJEU however has sided with Amazon on the matter, stating that the Commission “has not established that the tax ruling given to Amazon by Luxembourg was a State aid that was incompatible with the internal market”.

Amazon set up two subsidiaries in the country in 2003 in order to capitalise on Luxembourg’s famously low corporate tax rates.

The Commission handed the tax bill to Amazon in 2017, with the CJEU noting in its ruling this week: “According to the Commission, the account taken of a royalty that one of those two subsidiaries had paid to the other under a licence agreement concluded between them on the use of intangible assets artificially diminished the tax base of the first subsidiary and, ultimately, that of the Amazon group in Luxembourg and in Europe.”

The CJEU however said that the Commission “wrongly recognised the arm’s length principle, which seeks to assess whether intra-group transactions are made in accordance with market conditions, as having general application within the context of the implementation of EU State aid rules,” and that “since that principle has no autonomous existence in EU law, the Commission may rely on it only if it is incorporated into the national tax law concerned.”

As noted in its ruling: “In May 2021, the CJEU held that the Commission had not demonstrated to the requisite legal standard that the Amazon group subsidiary concerned had benefited from an undue reduction in its tax burden. It held that Luxembourg had not granted a selective advantage in favour of that subsidiary and therefore annulled the Commission decision.”

The Commission appealed this decision, but in a final decision, the Court rejected this appeal.

A spokesperson for Amazon praised the ruling, stating: “We welcome the Court’s ruling, which confirms that Amazon followed all applicable laws and received no special treatment. We look forward to continuing to focus on delivering for our customers across Europe.”

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