The European Court of Justice (ECJ) has annulled the decision of the European Commission regarding the retail giant Amazon and taxes in Luxembourg.
The Commission had deemed the tax treatment given to Amazon by Luxembourg as an unlawful State aid (of about €250 million).
In a press release issued on Thursday 14 December 2023, the Court of Justice of the European Union said: "The Court of Justice confirms 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."
Under a 2003 tax ruling, the Luxembourg authorities had agreed to Amazon's proposal concerning the treatment of its two Luxembourg-based subsidiaries in relation to corporate income tax. In 2017, the European Commission determined that the tax ruling was illegal under EU State aid rules and ordered Amazon to pay back €250 million in tax benefits (plus interest). Both Luxembourg and Amazon challenged the decision before the General Court of the European Union.
In May 2021, the General Court annulled the decision of the Commission, albeit on different grounds from those cited more recently by the ECJ. The General Court had found that the Commission had not demonstrated to the requisite legal standard that the Amazon group subsidiary had benefited from an undue reduction in its tax burden and ultimately annulled the Commission's decision.
In its judgment of 14 December 2023, the ECJ rejected the appeal brought by the Commission against the judgment of the General Court. The ECJ did, however, consider that the General Court had wrongly recognised the "arm's length principle", which has "no autonomous existence in EU law", meaning that the Commission can "rely on it only if it is incorporated into the national tax law concerned".
Nevertheless, the ECJ upheld the judgment under appeal, "since the Commission decision had to be annulled in any event because of the incorrect definition of the reference system, rather than for the reasons given by the General Court."
