EU orders Amazon to pay back €250 mn in taxes to Luxembourg

The EU has ordered Amazon, the world's largest online retailer, to pay back about €250 million in taxes to Luxembourg, saying it was given an unfair tax advantage from 2003.

Aligning with other US tech giants targeted by EU competition chief Margrethe Vestager, Amazon said it was considering an appeal over the payment.

The figure was lower than what people close to the case had expected and a fraction of the €13 billion that Apple was ordered to pay to Ireland last year, according to commentators.

"Luxembourg gave illegal tax benefits to Amazon. As a result, almost three quarters of Amazon's profits were not taxed," competition commissioner Vestager said.

According to the commission, the exact amount of tax to be reclaimed would still need to be calculated by Luxembourg authorities.

Rejecting the finding, Luxembourg said it would consider legal options.

Reuters had reported last year citing sources that Vestager had estimated the figure at €400 million.

According the Commission, Luxembourg allowed Amazon to channel a significant portion of its profits to a holding company without paying tax, thanks to the fact that it held certain intellectual property rights.

"The Commission's investigation showed that the level of the royalty payments, endorsed by the tax ruling, was inflated and did not reflect economic reality," the Commission said in a statement.

Meanwhile, the EC will today propose changes to the way VAT is levied on cross-border purchases, in a move that could hit US online retailer Amazon.

The changes are aimed at countering fraud and reining in excessive tax-planning by firms. They are also expected to help economies where sales are made retain more cash.

The VAT plan comes as part of a wider EU tax initiative that has irked some member states including Ireland.