- European Commission opens “in-depth” investigation into IKEA’s tax affairs in Europe.
- Probe centres around two Dutch rulings that EC believes may have given IKEA “an unfair advantage over other companies, in breach of EU State aid rules.”
LONDON – The European Commission has opened an “in-depth” investigation into IKEA’s tax affairs in Europe, centring around two rulings made in the Netherlands that the EC believes may have allowed IKEA to pay less tax.
The EC announced the investigation on Monday, saying it is concerned that IKEA may have been given “an unfair advantage over other companies, in breach of EU State aid rules.”
Competition commissioner Margrethe Vestager said in a statement: “All companies, big or small, multinational or not, should pay their fair share of tax.
“Member States cannot let selected companies pay less tax by allowing them to artificially shift their profits elsewhere. We will now carefully investigate the Netherlands’ tax treatment of Inter IKEA.”
The Dutch tax deals
The inquiry centres around two tax rulings made in the Netherlands, one in 2006 and one in 2011.
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.
The EC declared that scheme illegal in 2011. However, IKEA then restructured its businesses. The EC alleges that IKEA used an intercompany loan to offset tax, saying: “As a result of the interest payments, a significant part of Inter IKEA Systems’ franchise profits after 2011 was shifted to its parent in Liechtenstein.”
Here’s a diagram provided by the EC outlining the two tax arrangements:
- European Commission.
The EC said on Monday: “The Commission considers at this stage that the treatment endorsed in the two tax rulings may have resulted in tax benefits in favour of Inter IKEA Systems, which are not available to other companies subject to the same national taxation rules in the Netherlands.”
Inter IKEA Systems B.V., the Dutch company at the heart of the investigation, said in a statement: “Inter IKEA Group including its subsidiary Inter IKEA Systems B.V. is committed to paying taxes in accordance with laws and regulations wherever we operate.
“The way we have been taxed by national authorities has in our view been in accordance with EU rules. It is good if the investigation can bring clarity and confirm that.”