EU Lower Court Annuls State Aid Decision In Amazon Case

On 12 May 2021, the General Court of the EU fully annulled the European Commission decision of October 2017 finding that Luxembourg had granted unlawful State aid to Amazon by means of a 2003 tax ruling. The European Commission may file an appeal with the Court of Justice of the EU.

Factual background

The case concerned the arm's length nature of a royalty paid by a Luxembourg operating company (LuxOpCo) to a Luxembourg partnership (LuxSCS) – a tax transparent entity in Luxembourg – for the use of certain intangibles (technology, marketing-related intangibles and customer data).

In the 2003 tax ruling, the Luxembourg tax authorities had confirmed the arm's length nature of the deductible royalty payments. The supporting transfer pricing analysis applied the transactional net margin method (TNMM), a one-sided transfer pricing method, with LuxOpCo as tested party. Hence, it determined an arm's length remuneration for LuxOpCo and any business income in excess of