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European Union to Investigate IKEA for Receiving 'Unfair Tax Advantages'

European Union to Investigate IKEA for Receiving 'Unfair Tax Advantages'

"Member States cannot allow some companies to pay fewer taxes by artificially relocating profits elsewhere can". This entitles the IKEA shops to use the IKEA trademark, and receive know-how to operate and exploit the IKEA franchise concept. In particular, the Commission's focus will be on whether the acquisition price adequately reflects the contribution made by Inter IKEA Systems to the value of the franchise business and the level of interest deducted from Inter IKEA Systems' tax base in the Netherlands.

Between 2006-2011, the Netherlands subsidiary paid annual licence fees to a related Luxembourg company, I.I. Holding, which were likely deductible in the Netherlands.

As a result, a significant part of Inter IKEA Systems' franchise profits were shifted from Inter IKEA Systems to I.I. Holding in Luxembourg, where they remained untaxed.

A spokesman for Inter Ikea Group argued that the way it had been taxed "has in our view been in accordance with European Union rules", BBC noted. To finance this acquisition, Inter IKEA Systems received an intercompany loan from its parent company in Liechtenstein. It also endorsed the interest to be paid under loan to the parent company and the deduction of these interest payments from Systems' taxable profits in the Netherlands.

A probe into Ikea, one of Europe's best-known brands, may ease criticism Vestager has received for focusing on how US companies reduce taxes.

In a blockbuster decision, the commission in 2016 ordered Apple Inc.to pay Ireland EUR13 billion, in what it said was uncollected taxes, a ruling both Apple and Ireland are contesting.

Celtic's Unbeaten Run Brought To Shuddering Halt By Humiliating Defeat
There has been a sense that Celtic have been hanging on to their undefeated run by a thread for several weeks now. Celtic have started the season in imperious form and have yet to taste defeat in their opening 17 games.

European Competition Commissioner Margrethe Vestager said all firms "big or small, multinational or not, should pay their fair share of tax".

The 2006 ruling endorsed a tax arrangement that IKEA's core company used to shift "a significant part" of its revenues to a special tax scheme in Luxembourg that was exempt from corporation tax.

I.I. Holding paid no corporate tax in Luxembourg because of Luxembourg tax rules in place at the time.

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.

Your local High Street furniture store has enough trouble competing with the likes of Ikea, with its massive stores, name recognition, buying power and marketing budget, without Ikea also having access to tax breaks that it could never use.

The role of EU State aid control is to ensure that Member States do not give selected companies a better tax treatment than others, via tax rulings or otherwise. Regulators will assess "if the level of the annual license fee reflects" the company's contribution to the franchise business. The report stated that IKEA is said to have built up a network of subsidiaries in the Netherlands, Luxembourg and Liechtenstein.

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