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The decision by the European Commission came after a three-year
long investigation, part of its crackdown against illegal
sweetheart deals between EU governments and multinationals that
has resulted in Apple <AAPL.O>, Starbucks <SBUX.O> and Fiat <FCHA.MI>
paying billions of euros in back taxes.
The Commission said McDonald's tax deal was in line with
national tax laws and the Luxembourg-U.S. double taxation
treaty.
"Our in-depth investigation has shown that the reason for double
non-taxation in this case is a mismatch between Luxembourg and
U.S. tax laws, and not a special treatment by Luxembourg.
Therefore, Luxembourg did not break EU state aid rules,"
European Competition Commissioner Margrethe Vestager said.
"Of course, the fact remains that McDonald's did not pay any
taxes on these profits – and this is not how it should be from a
tax fairness point of view," she said.
The investigation had focused on McDonald's Luxembourg-based
subsidiary Europe Franchising which receives royalties from
franchisees in Europe, Ukraine and Russia.
Luxembourg in a 2009 tax ruling said the company did not have to
pay corporate taxes as its profits would be taxed in the United
States. In a second tax ruling, the Grand Duchy said that the
company was no longer required to prove that its royalty income
was subject to U.S. taxation.
In June this year, Luxembourg presented draft legislation to
avoid double non-taxation.
Luxembourg said in a statement that it welcomed the Commission's
recognition of the steps it had taken to avoid similar cases in
future.
(Reporting by Foo Yun Chee; editing by Philip Blenkinsop)
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