The European Union has announced an investigation into the tax model used by Ikea – the world’s largest furniture retailer.
The European Commission said it would centre on concerns that two Dutch tax rulings may have allowed part of the retail group to pay less tax since 2006.
It argued the rulings may have given the company an unfair advantage over competitors and breached state aid rules in the process.
The inquiry will focus on the division of Ikea that operates its franchise model, which sees franchisees pay Netherlands-based Inter Ikea 3% of their turnover.
The Commission said: “Our preliminary inquiries indicate that two tax rulings, granted by the Dutch tax authorities in 2006 and 2011, have significantly reduced Inter Ikea’s taxable profits in the Netherlands.”
The first concerned the acceptance of a method in 2006 to calculate an annual licence fee to be paid to another company of the Inter Ikea group, based in Luxembourg.
Officials claimed a “significant” sum in franchise profits was shifted there from the Netherlands, with no tax paid.
The EU declared the Dutch ruling illegal but Brussels was later foiled in its efforts to halt the arrangement as Inter Ikea changed the way it was structured.
The second tax ruling under scrutiny is the agreement of a model that allowed franchise profits to be moved to Liechtenstein from 2011.
Competition Commissioner Margrethe Vestager said: “All companies, big or small, multinational or not, should pay their fair share of tax.
“Member states cannot let selected companies pay less tax by allowing them to artificially shift their profits elsewhere.
“We will now carefully investigate the Netherlands’ tax treatment of Inter Ikea.”
A company spokesman said: “Inter IKEA Group including its subsidiary Inter IKEA Systems B.V. is committed to paying taxes in accordance with laws and regulations wherever we operate.
“The way we have been taxed by national authorities, has in our view been in accordance with EU rules. It is good if the investigation can bring clarity and confirm that.
“A state aid investigation is a matter between the European Commission and concerned member states.
“We study the opening decision and we cooperate and respond to any questions the Dutch authorities or the European Commission might have.”
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Ikea the latest big name to face such a probe.
Apple is currently fighting a ruling it must pay Ireland €13bn in unpaid back taxes – a decision the country fought but was later forced to accept by Brussels, following an EU state aid investigation.
Source: SKY News