Amazon, Luxembourg tell EU court that 2003 ruling was time-barred from EU probe

Amazon.com and the European Commission sparred today over whether the regulator was time-barred from probing a 2003 tax ruling that handed the e-commerce giant tax breaks worth hundreds of millions of euros.

Lawyers for the US tech company accused officials of inventing a new category of state aid, while the commission argued that Luxembourg breached EU rules each time it accepted a tax return from Amazon.

Amazon is appealing before the EU General Court against a 2017 commission decision that ordered Luxembourg to recoup 250 million euros ($275 million today) in tax from Amazon.

At the origin of the decision was a 2003 tax ruling given by the Grand Duchy to the online retailer. Since Amazon's arrival in Luxembourg was delayed to 2006, Luxembourg issued letters in 2004 and 2006 confirming the ruling. It then renewed the ruling in 2011.

The timing matters, because EU investigators have a 10-year window to probe alleged infringement of state-aid rules, and their inquiry began in 2014.

The commission maintains that the aid was renewed by the 2004 and 2006 letters. But in any case, Paul-John Loewenthal contended, the commission can also base itself on the date when the aid was handed out.

"Amazon did not begin to rely on that ruling to prepare its tax returns until 2007," after establishing its European headquarters in Luxembourg in 2006, the commission lawyer noted.

EU state aid law, he argued, views a tax ruling like it does "an unlimited guarantee for the future: You benefit when you rely on it."

"What we have here is a multi-annual individual measure," Loewenthal argued.

Michel Petite, pleading for Amazon, disagreed: "I don't want to cause a controversy, but I think the EC is trying to insert a new [category of state aid], between a scheme and a measure."

He continued: Wouldn't the commission's version mean that a member state should notify the commission each time a company filed a tax return on the basis of a ruling?

In any case, the decision's "entire reasoning is about the ruling. At no place is there an analysis of each of the returns," Petite added.

He said EU investigators couldn't rely on the 2004 and 2006 letters, since these were mere short confirmations of the ruling's validity.

Both Amazon and Luxembourg conceded that the commission was on safer ground after 2011, once the tax ruling was renewed.

But Petite urged the judges to take into account that the tax ruling had not changed, therefore it may not qualify as a new event that restarts the clock for the commission.

The case reference is T-318/18, Amazon EU and Amazon.com v Commission.