The European Commission and EU antitrust chief Margrethe Vestager have been handed a defeat in their attempts to crack down on corporate tax avoidance.

The Luxembourg-based Court of Justice of the European Union (CJEU) ruled “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.”

The ruling by the EU’s top court is final, which ends the long-running legal battle over tax arrangements between Amazon and Luxembourg. The EU continues to pursue other big name tech giants over their ‘sweetheart’ tax arrangements with countries such as Ireland and Luxembourg.

Court ruling

Now the CJEU has backed a General Court decision in 2021 that sided with Amazon, when it ruled 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.”

Europe’s top court this week endorsed the lower court’s ruling that the European Commission had not proved its case that Amazon received illegal state support.

“In its judgement handed down today, the Court of Justice rejects the appeal brought by the Commission against the judgement of the General Court,” the CJEU ruling reads. “The Court considers that the General Court 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.”

“However, despite those errors of law and the incorrect conclusion of the General Court…the Court of Justice upholds the (lower court) judgement under appeal.”

“We welcome the Court’s ruling, which confirms that Amazon followed all applicable laws and received no special treatment,” an Amazon spokesperson was quoted as saying by the Associated Press. “We look forward to continuing to focus on delivering for our customers across Europe.”

The European Commission was quoted as saying it “will carefully study the judgement and assess its implications.”

Case background

The tax case dates back to 2017 when Margrethe Vestager had charged Amazon with unfairly profiting from special low tax conditions since 2003 in Luxembourg.

Amazon’s European headquarters are based in Luxembourg. As a result, almost three-quarters of Amazon’s profits in the EU were not taxed, Vestager had alleged.

For years there had been complaints that big name tax firms were avoiding paying their fair share of tax within the European Union, by basing their European headquarters in “low tax” areas such as Ireland and Luxembourg.

The European Commission has pursued these ‘sweetheart’ tax arrangements between big name firms and certain countries, with mixed success.

Earlier this month, French utility Engie won its fight against an EU order to pay 120 million euros in back taxes to Luxembourg.

The European Commission is also continuing to pursue its high profile case against Apple, after an EU lower court in 2020 had ruled in favour of Apple, overturning a 13-billion-euro ($16.6 billion) tax order made against Apple by the Commission.

In October 2021 the Organisation for Economic Cooperation and Development (OECD) reached an agreement on a global corporation tax rate, sounding the beginning of the end for global corporations utilising low-taxing countries to limit their corporate tax obligations.

That agreement saw 136 countries and jurisdictions (representing more than 90 percent of global GDP) agreeing a global minimum corporate tax rate of 15 percent.

The arrival of this global corporate tax law is slated for 2024.

Tom Jowitt

Tom Jowitt is a leading British tech freelancer and long standing contributor to Silicon UK. He is also a bit of a Lord of the Rings nut...

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