“Ikea deducted a billion euro too much from its taxes”

In the past six years, Ikea unlawfully deducted about one billion euro from its taxes according to the European Commission’s preliminary findings. The EC launched an investigation into the Swedish company’s deal with the Dutch treasury.

“Unlawful state aid”

European Commissioner for Competition, Margrethe Vestager, announced on 18 December that the Commission had launched a fiscal investigation into alleged “illegal state aid” given to Ikea by the Netherlands. The investigation’s public findings were published on Tuesday and it showed that the EU will further investigate two so-called “rulings” between Ikea’s Dutch subsidiary Systems and the Dutch treasury, from 2006 and 2011.

“Up until 2011, Ikea used licences to lower its tax level”, Dutch business paper FD writes. “Subsidiary Systems received license fees from Ikea stores all across the world. In order to lower taxes on these funds, the Dutch company used to have a license deal with an Ikea subsidiary in Luxembourg.” That particular subsidiary then enjoyed an corporate tax exemption.

Systems acquired those rights in 2011 for 9 billion euro and nearly two thirds of that fee (5.4 billion euro) was financed with a repayment-free internal loan with a 6 % interest. Vestager considers this to be “selective prejudice”: her research says the rights were “probably priced too high” and “no external financer” would ever have loaned Systems that sum in 2011.

“Over the past six years, Ikea has therefore unlawfully deducted about one billion euro from its taxes. It may have to pay an additional 280 million euro”, according to the Dutch business paper.