European Union Investigating Tax Affairs of Ikea

An in-depth investigation will be opened by the European Commission into the corporate tax structure of Ikea.

The Commission has said that Inter Ikea, based in the Netherlands, one of the two divisions of the Swedish giants, might have received tax advantages from the Netherlands that were unfair.

Margrethe Vestager, the Competition Commissioner of the European Union said all businesses regardless of size, multinational or not, must pay their share of taxes.

The EU will investigate whether the tax affairs of Ikea breach rules by the EU related to state aid.

Under EU law, member nations are not allowed to give selective benefits of taxes to multinational groups that other firms do not have access to.

The Commission is concerned that a pair of tax rulings by the Netherlands might have given the Swedish company’s Dutch division unfair advantage in comparison to other businesses, said a EC press release.

The inquiry by the Commission is focused upon a pair of tax agreements between Inter Ikea and the Netherlands that the Commission alleges significantly lowered the company’s taxable profits.

Inter Ikea, based in the Netherlands, operates the Ikea franchise business. It collects the royalties of Ikea franchisees and pays little tax on those proceeds.

In 2006, the EC said a tax ruling by the Dutch, allowed Inter Ikea to pay a substantially less license fee to a Luxembourg based Ikea unit, thereby moving revenue into a jurisdiction where it was not taxed.

Then during 2011, after the tax scheme in Luxembourg was branded illegal, Inter Ikea was able to arrange another tax ruling with the Dutch.

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.

A senior EU official from the Netherlands said the government there would look into the case. The Netherlands, said the official, supports the work of the Commission.

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

The EU recently ordered several member states to collect back taxes in the billions of euros form Amazon, Apple, Fiat and Starbucks.

The EC is concerned that the giant companies are gaining unfair advantages over their smaller rivals that have little or no chance of receiving similar tax advantages.

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