ECJ: No selective advantage for Amazon subsidiary

Jun 2, 2021 Benn-Ibler Rechtsanwälte

In the present case, the General Court of the European Union annulled a Commission decision concerning operating aid because the findings in the decision could not be proven accordingly. The background was the taxation of two Luxembourg subsidiaries of the Amazon group (LuxSCS and LuxOpCo), and the fee paid by LuxOpCo to LuxSCS under a license agreement.

In 2003, the Amazon Group applied to the Luxembourg tax authorities for a preliminary tax ruling approving the calculation of the arm's length price of the fees using the net margin method.

The European Commission considered this to be operating aid incompatible with the Single Market. The Commission argued that LuxOpCo had thus gained an advantage; in the first place, LuxSCS should have been referred to as the tested company.

The General Court first points out that the Commission must first demonstrate methodological errors which prevented the arm's length price from being correctly estimated in order to establish an advantage obtained. Based on this, the Court finds that the Commission's reasoning is flawed.

For example, the Commission found that LuxSCS was only the passive owner of the intangible assets underlying the license agreement. This is erroneous in that the Commission did not take due account of LuxSCS's tasks and risks, nor was it able to demonstrate that comparable undertakings to LuxSCS could be more easily identified. LuxOpCo was thus not wrongly used as the tested company.

Furthermore, the Commission erroneously stated that the subsequent increase in the value of the intangible assets was irrelevant for the remuneration, but could be determined solely on the basis of the costs incurred by the contract. Therefore, it could not be proven that there was an advantage at all.

Furthermore, the Commission did not assess the remuneration correctly, as it wrongly equated LuxSCS's tasks of preserving its rights to intangible assets with 'low value-added' services.

General Court of the European Union – Press release no. 79/21 (Luxemburg)