No selective advantage in favour of a Luxembourg subsidiary of the Amazon group: the General Court annuls the Commission’s decision declaring the aid incompatible with the internal market
According to the General Court, the Commission did not prove to the requisite legal standard that there was an undue reduction of the tax burden of a European subsidiary of the Amazon group
From 2006, the Amazon group pursued its commercial activities in Europe through two companies established in Luxembourg, namely Amazon Europe Holding Technologies SCS (‘LuxSCS’), a Luxembourg limited partnership, the partners of which were US entities of the Amazon group, and Amazon EU Sàrl (‘LuxOpCo’), a wholly owned subsidiary of LuxSCS.
Between 2006 and 2014, LuxSCS held the intangible assets necessary for the Amazon group’s activities in Europe. To that end, it concluded various agreements with US entities of the Amazon group, namely licence and assignment agreements for pre-existing intellectual property with Amazon Technologies, Inc. (ATI) (‘the Buy-In agreements’) and an agreement for the sharing of costs linked to the development of those intangible assets (‘the cost-sharing agreement’) with ATI and a second entity, A9.com, Inc. Under those agreements, LuxSCS obtained the right to exploit certain intellectual property rights, consisting essentially of technology, customer data and trade marks and to sub-licence those intangible assets. On that basis, LuxSCS concluded, inter alia, a licence agreement with LuxOpCo, as the principle operator of the Amazon group’s business in Europe. Under that agreement, LuxOpCo undertook to pay a royalty to LuxSCS in return for the use of the intangible assets.
On 6 November 2003, in response to a request from the Amazon group, the Luxembourg tax authorities granted that group a tax ruling (‘the tax ruling’). The Amazon group had requested confirmation of the treatment of LuxOpCo and LuxSCS for the purposes of Luxembourg corporate income tax. As regards, more specifically, the determination of LuxOpCo’s annual taxable income, the Amazon group had proposed that the ‘arm’s length’ royalty to be paid by LuxOpCo to LuxSCS should be calculated according to the transactional net margin method (‘the TNMM’), using LuxOpCo as ‘the tested party’.
The tax ruling, first, confirmed that LuxSCS was not subject to Luxembourg corporate income tax because of its legal form and, secondly, endorsed the method of calculating the annual royalty to be paid by LuxOpCo to LuxSCS under the abovementioned licence agreement.