IKEA to face EU order to pay Dutch back taxes: sources

[October 07, 2019]    By Foo Yun Chee

BRUSSELS (Reuters) - IKEA brand owner Inter IKEA could be ordered to pay millions of euros in Dutch back taxes by the end of the year, two people familiar with the matter said, as EU competition enforcers push on with their crackdown against unfair tax deals granted to multinationals.

The European Commission is now racing to wrap up the two-year investigation into the brand owner of IKEA, known for giant out-of-town budget furniture stores, but the timing may still slip as it weighs the scope of the case, the people said.

The EU executive declined to comment.

Launched in 2017, the EU's investigation focuses on Inter IKEA Systems in the Netherlands, which operates IKEA's franchise business and records all revenue from its franchise fees worldwide collected from IKEA shops.

The Commission said at the time its investigation was triggered by a 2016 report from European Parliament green lawmakers which estimated that IKEA avoided 1 billion euros ($1.1 billion) in taxes over the course of six years.

Inter IKEA said in an emailed comment on Monday: "Just like all other companies working under the IKEA trademark, Inter IKEA Systems B.V. is committed to paying taxes in accordance with laws and regulations wherever we operate. We believe that we also in these cases have paid the correct amount of tax.”

The spotlight is on two tax rulings granted by the Dutch tax authorities in 2006 and 2011, which the European Commission said have significantly reduced Inter IKEA Systems' taxable profits in the Netherlands and given it an unfair advantage.

The EU competition enforcer said the first tax ruling, which covered 2006 to 2011, resulted in a significant part of Inter IKEA Systems' franchise profits shifting to a Luxembourg unit where it was not taxed.

A 2011 ruling allowed a substantial part of the company's franchise profits after 2011 to be transferred to its Liechtenstein parent.

The EU order comes after Europe's second-highest court last month backed the EU executive's methodology in its cases against Fiat and Starbucks.

(Reporting by Foo Yun Chee; additional reporting by Anna Ringstrom; editing by Robin Emmott and Louise Heavens)

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