Tag Archive: Amazon

1. Amazon Faces €1.2 Billion VAT Evasion Allegations in Italy

   17 February 2025 6:48 am Leave a Comment

   Amazon VAT Evasion Allegations in Italy – Introduction

   Tax authorities in Italy have accused Amazon of evading €1.2 billion in Value Added Tax (VAT) on sales from China and other non-EU countries between 2019 and 2021.

   The claim suggests that goods sold via Amazon’s platform avoided proper VAT reporting, allowing sellers to underpay tax or avoid it entirely.

   This case is part of a larger crackdown on digital platforms suspected of facilitating tax avoidance through complex supply chains and offshore structures.

   This isn’t the first time tech giants have clashed with European tax authorities.

   The EU has been tightening VAT compliance rules in response to concerns that e-commerce giants give an unfair advantage to overseas sellers by allowing them to avoid local tax obligations.

   If Amazon is found guilty, the case could have major implications for online marketplaces operating in the region.

   What’s Happening?

   The Italian Guardia di Finanza (tax police) and the Agenzia delle Entrate (Revenue Agency) claim that between 2019 and 2021, Amazon acted as an intermediary for thousands of non-EU sellers, predominantly from China, who were not properly registered for VAT in Italy.

   This allegedly allowed sellers to undercut local competitors, as they were selling goods at VAT-free prices.

   Amazon has denied wrongdoing, stating that it complies with all applicable laws and has invested in systems to identify and block non-compliant sellers.

   However, tax authorities argue that the company should have done more to ensure sellers were VAT-registered before listing their products.

   Italy has previously targeted other e-commerce giants, including Alibaba and eBay, for similar VAT issues.

   In 2019, it was estimated that VAT fraud in the e-commerce sector cost EU governments over €5 billion annually.

   Why Does This Matter?

   VAT fraud in e-commerce is a significant issue across Europe, as platforms like Amazon have allowed non-EU sellers to access the market without the same tax burdens as domestic businesses.

   The EU has introduced new VAT rules, including the One Stop Shop (OSS) system and Marketplaces as Deemed Suppliers regulations, to prevent platforms from facilitating VAT avoidance.

   If Italy succeeds in its case, Amazon could be held liable for the unpaid VAT, which might force other countries to take similar legal action.

   The case also highlights broader tax policy challenges in the digital economy, particularly who should be responsible for ensuring VAT compliance—the seller or the platform.

   Amazon VAT Evasion Allegations in Italy – Conclusion

   If Amazon is found guilty of VAT evasion in Italy, the consequences could be significant for the entire e-commerce industry.

   More platforms may face pressure to enforce stricter tax compliance rules, and non-compliant sellers could be blocked from EU markets altogether.

   For businesses and consumers, this case serves as a reminder that tax compliance in the digital economy is becoming more scrutinised.

   Final thoughts

   If you have any queries about this article on Amazon VAT Evasion Allegations in Italy, or tax matters in Italy more generally, then please get in touch.

   Alternatively, if you are a tax adviser in Italy and would be interested in sharing your knowledge and becoming a tax native, then please get in touch. There is more information on membership here.

2. CJEU Rules in Favour of Amazon and Luxembourg in State Aid Case

   1 January 2024 10:00 am Leave a Comment

   Amazon and Luxembourg state aid case – Introduction

   On 14 December 14, 2023, the Court of Justice of the European Union (CJEU) delivered an eagerly awaited judgment in favor of Amazon and Luxembourg, upholding the May 2021 decision of the General Court.

   This judgment dismissed the European Commission’s appeal, confirming that Amazon did not receive unlawful state aid from Luxembourg.

   The CJEU’s judgment is definitive and marks a significant moment in the ongoing discussions around state aid and tax rulings within the EU.

   The Facts

   The case centered around the arm’s length nature of a royalty paid by a Luxembourg operating company (LuxOpCo) to a Luxembourg partnership (LuxSCS).

   The payment was for the use of intangibles like technology, marketing-related intangibles, and customer data.

   In 2003, the Luxembourg tax authorities had confirmed the arm’s length nature of these deductible royalty payments, based on a transfer pricing analysis using the transactional net margin method (TNMM).

   European Commission’s Stance and General Court’s Judgment

   The European Commission had challenged this arrangement, arguing that LuxOpCo’s tax base was unduly reduced, effectively constituting state aid.

   However, the General Court identified factual and legal errors in the Commission’s analysis and annulled its decision, a position now affirmed by the CJEU.

   CJEU’s Judgment

   The CJEU agreed with the General Court’s conclusion but based its decision on different grounds.

   Echoing its approach in the Fiat judgment of November 2022, the CJEU held that the OECD transfer pricing guidelines could not be part of the “reference framework” for assessing normal taxation in Luxembourg.

   This is because Luxembourg law did not explicitly refer to these guidelines.

   Thus, the European Commission’s decision was fundamentally flawed.

   The CJEU concluded that even though the General Court had used an incorrect reference framework, its ultimate decision to annul the Commission’s decision was correct.

   The CJEU, therefore, chose to rule directly and confirm the annulment of the European Commission’s decision.

   Implications for Other Cases and Taxpayers

   This judgment aligns with previous rulings in the Fiat and ENGIE cases, underscoring that the European Commission cannot enforce non-binding OECD transfer pricing guidelines over national legal frameworks.

   However, these guidelines may still be relevant if they are explicitly referenced in national laws.

   The judgment also has implications for the pending appeal in the Apple case, which similarly involves intragroup profit allocation and the definition of the correct reference framework.

   Additionally, it influences other ongoing formal investigations, although details on these cases remain non-public.

   Amazon and Luxembourg state aid case – Conclusion

   The CJEU’s decision marks a crucial development in the landscape of EU state aid law, particularly concerning the application of transfer pricing rules and the boundaries of the European Commission’s powers.

   It highlights the importance of national legal frameworks in determining the arm’s length principle and sets a precedent for future cases involving similar issues.

   Final thoughts

   If you have any queries about this article on the Amazon and Luxembourg state aid case, or Luxembourg tax matters in general, than please get in touch.