In detailing cause for Amazon probe, EU executive says tax deal with Luxembourg may be illegal

BRUSSELS – The European Union’s executive says the tax deal Amazon signed with Luxembourg may be illegal.

The EU opened an investigation into Amazon in October and on Friday gave a preliminary assessment of its concerns with the technology company’s dealings.

Amazon registers its profits from across the EU at its unit in Luxembourg. Amazon’s taxable profits in Luxembourg are further reduced by making royalty payments to another Luxembourg-based Amazon entity that is not subject to corporate taxation.

The result is that not only does Amazon pay little tax in many EU countries where it operates, but also that its effective tax rate in Luxembourg is particularly low.

The EU Commission said Friday that it is worried this arrangement could “grant an economic advantage to Amazon” compared with other companies.