EU investigates Ikea's Dutch tax deals

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Member states can not let selected companies pay less tax by allowing them to artificially shift their profits elsewhere.

BRUSSELS-Ikea is the latest company ensnared in the European Union's sprawling tax probes as regulators look at whether the retailer's revenue deals in the Netherlands allowed it to avoid hundreds of millions of euros of taxes. In return, the IKEA shops are entitled to use inter alia the IKEA trademark, and receive know-how to operate and exploit the IKEA franchise concept.

Last month the Commission launched an investigation into a British tax exemption for multinational companies set up by the then-Conservative-led government in 2013 to attract companies to set up headquarters in Britain.

From 2006 to 2011 Systems paid an annual licence fee to another group company (Holding), based in Luxembourg which held some of the intellectual property (IP).

Following the determination that the Luxembourg law's was illegal, Inter IKEA Systems purchased the IP rights held by I.I. Holding.

It will also consider whether the price Systems paid for the IP rights and the interest paid for the intercompany loan, endorsed in the 2011 tax ruling, "reflect economic reality".

The Commission is investigating Dutch tax rulings issued in 2006 and 2011 that may have allowed the IKEA subsidiary, Inter IKEA, to reduce taxable profits in the Netherlands, giving it an unfair competitive advantage over other companies in breach of EU State aid rules.

"All companies, big or small, multinational or not, should pay their fair share of tax", said EU Competition Commissioner Margarethe Vestager on Monday.

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"The Netherlands will, of course, cooperate with the investigation in order to establish whether it involves state aid", the Dutch government said in a statement.

The revelations came as a particular embarrassment for European Commission President Jean-Claude Juncker, who was prime minister of Luxembourg at the time when the tax deals were made.

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".

The European Commission has ordered several members of the 28-nation bloc to collect billions of euros in back taxes from companies including Amazon, Apple, Fiat and Starbucks.

The EU continues to investigate Engie's as well as McDonald's Corp.'s tax affairs with Luxembourg.

Inter IKEA's subsidiary, Inter IKEA Systems, recognizes significant income in the Netherlands. Specifically, the Commission will assess whether the fee endorsed by the ruling reflects economic reality given Inter IKEA Systems' contribution to the franchise business.

Under EU law, member states can not give selective tax benefits to multinational groups that are not available to other firms.

The commission said it believed the tax treatment given to IKEA wasn't available to other companies in the Netherlands.