stayontheblack.com

Business

European Union to investigate Ikea tax payments

The furniture retailer’s Dutch tax arrangements are thought to be the subject of the inquiry

"Member States cannot allow some companies to pay fewer taxes by artificially relocating profits elsewhere can".

Ikea is not the first multinational to face a European investigation: Starbucks and Apple were also forced to pay late taxes after a EC investigation deemed that necessary.

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. This entitles the IKEA shops to use the IKEA trademark, and receive know-how to operate and exploit the IKEA franchise concept. "We will now carefully investigate the Netherlands' tax treatment of Inter IKEA".

From 2006 to 2011 Systems paid an annual licence fee to another group company (Holding), based in Luxembourg which held some of the intellectual property (IP).

The EU ordered Amazon to pay €250 million ($293 million) in October after finding that it benefited from an illegal tax arrangement with Luxembourg.

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.

They'll also review a 2011 tax ruling on the reorganization of the company's tax affairs, looking at whether the price Inter Ikea Systems agreed on to buy intellectual property rights and the interest paid on an intercompany loan reflect economic reality.

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

The European Commission is not so much anxious about different countries in the European Union having different tax policies, in fact considering it is supposed to be one, seamless market, there are a whole range of company tax rates and policies across the EU.

The news came after leaked documents showed that Apple had chosen to move a subsidiary from Ireland to Jersey in order to continue avoiding billions in taxes, after an European Union crackdown in 2013. All firms "big or small, multinational or not, should pay their fair share of tax", she said.

The "in-depth" investigation into IKEA's tax dealings comes as part of the EU's push against the favorable taxation cuts being given by its member states to large corporations to ensure the steady flow of jobs and investment.

The EU continues to investigate Engie's as well as McDonald's Corp.'s tax affairs with Luxembourg. Specifically, the Commission will assess whether the fee endorsed by the ruling reflects economic reality given Inter IKEA Systems' contribution to the franchise business. "Ikea has been using a series of tax loopholes for years to avoid paying taxes", said German Green MEP Sven Giegold.