Europe investigates McDonald's tax deals

No royalty tax

Europe’s focus is mostly on the Luxembourg ruling which means McDonald’s has been given a favourable situation regarding its royalties. Ever since 2009, all European and Russian franchisees have had to pay royalties to a Luxembourg subsidiary in order to be able to use the brand. It allowed McDonald’s to draw away money from other countries, lowering its taxes over there, while it did not have to pay any royalty taxes in Luxembourg either.

The reasoning behind the ruling is that McDonald’s already pays taxes in the United States, which meant it could be exempt of these additional taxes. European researchers have wiped that reasoning off the table, especially because the company did not have to pay any royalty taxes in the United States at the time of the ruling. European commissioner Margrethe Vestager says tax treaties are meant to avoid paying profit taxes twice, not to avoid paying taxes at all.

Not the first

McDonald’s is not the first company to come under fire, as the European Union has already forced Luxembourg to get 20 million euro in additional taxes from Italian car manufacturer Fiat, similarly to what the Netherlands will have to do with coffee chain Starbucks. Other well-known cases are Luxembourg-Amazon and Ireland-Apple.

It was revealed last year that Luxembourg had given more than 340 companies specific rulings, which led to the name LuxLeaks.