Ikea Tax Arrangement With Netherlands Investigated

Europe investigates Ikea tax evasion via Netherlands

Investigators also are looking at a subsequent ruling by the Dutch authorities in 2011 after European regulators deemed the Luxembourg tax structure illegal under state-aid rules.

"All companies, big or small, multinational or not, should pay their fair share of tax", competition commissioner Margrethe Vestager said in a statement. "Member States cannot allow some companies to pay fewer taxes by artificially relocating profits elsewhere can".

The opening of the in-depth investigation enables the Netherlands and other interested third-parties to submit comments. Specifically, the Commission will assess whether the fee endorsed by the ruling reflects economic reality given Inter IKEA Systems' contribution to the franchise business.

The Commission's Ikea inquiry is focused on two tax agreements between the Netherlands and Inter Ikea which it alleges "have significantly reduced" the firm's taxable profits in the Netherlands.

This move by the EC is the most recent crackdown by the competition authority of the European Union on tax deals made between countries in the European Union with multinationals.

In accordance with Vestager's blockbuster 2015 decision against Apple, Ireland said earlier this month it will begin collecting the 13 billion euros in back taxes owed by the US-based iPhone-maker.

"The Netherlands fully supports the Commission's work", a senior Dutch EU official said, adding the government would have to look at the details of the case.

The holding company of IKEA Group, INGKA Holding B.V., as well as a majority of the group functions and management, are based in the Netherlands.

Inter IKEA group operates the franchise business of IKEA, using the "IKEA franchise concept", so Inter IKEA does not own the IKEA shops.

That second ruling focused on a loan with a unit of Ikea in Liechtenstein, which allowed Inter Ikea to shift a substantial part of is profits to a jurisdiction considered low tax.

Founded in Sweden but now headquartered in the Netherlands, Ikea is known for its cheap but reliable self-assembly tables, bookcases and beds. No illegal aid needed to be recovered from I.I. Holding because the scheme was granted under a Luxembourg law from 1929, predating the EC Treaty. "Ikea's tax practises are a theft on society".

Monday's news might prove an embarrassment for European Commission President Jean-Claude Juncker, theprime minister of Luxembourg at the time the tax deals were made.

Ireland began receiving almost $15.33 billion in back taxes this month from Apple after a commission investigation determined that Apple used a loophole in Irish tax law to store much of its non-U.S. profits in the country.

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