As Amazon.com, Inc. (NASDAQ:AMZN) came under scrutiny by the European Union for tax evasion, it began to reveal its revenues in different countries in the continent to limit to prevent the consequences. However, as Reuters reports, the European Union will continue to closely observe the e-commerce giant, impose new tax bills, and manage its tax figures, and the new business structure could increase its tax bill by $100 million annually.
Amazon pays little in taxes in Europe, as it has established branches, which do business on its behalf with companies based in Luxembourg, the largest of which is Amazon EU Sarl. Since it’s a branch, Amazon EU Sarl doesn’t need to report any revenues of its own, and thus authorities can’t use its figures for tax assessments.
The Amazon EU Sarl pays large amounts to Amazon Europe Holding Technologies SCS for using Amazon’s rightful patents. The two ventures are part of a partnership, which exempt them from paying taxes in Luxembourg. Due to this, since Amazon EU Sarl itself turns in low profits, the European Authorities don’t gain anything going after this branch.
The new structure, which European authorities are imposing, makes Amazon EU Sarl pay tax on earnings in Germany and the UK, while Amazon Europe Holding Technologies is not obliged to pay such taxes. However, in the same structure, European authorities have been granted the power to question the reasoning behind the transactions between Amazon Europe Holding Technologies and Amazon EU Sarl in Germany, Spain, Italy, and Britain. This is expected to give the authorities an exercisable option to extract more taxes from Amazon establishments in Europe.
Amazon declined to comment on the inquiries related to its tax evasive practices and the subsequent tax bill. The company’s last-minute decision to reveal revenues when under scrutiny by the EU didn’t quite help, and it walks on thin lines in Europe, as the authorities continue to investigate.