IKEA's tax deal with the Netherlands is to be investigated by Brussels on suspicion that the Swedish chain has benefited from huge tax reductions that are against European rules on state aid.
"The European Commission has opened an in-depth investigation into the tax treatment given by the Netherlands to Inter IKEA, one of the two groups that operate the IKEA business," the European Commission stated, adding that there is concern that two Dutch tax decisions "may have allowed Inter IKEA to pay less taxes and confer an unfair advantage on the company over other companies, in breach of EU state aid rules."
Inter IKEA is the latest target in a process that saw Apple being forced to pay €13 billion in back taxes to the Irish government.
In the case of the Swedish company, there have been two agreements with the tax authorities in the Netherlands which have saved around €1 billion, according to a report from the Greens/European Free Alliance submitted to Brussels.
"All companies, large or small, multinational or not, have to pay their taxes. Member States can not allow certain companies to pay less tax by allowing them artificially to alter their profits elsewhere," said European competition commissioner, Margrethe Vestager.
IKEA says it complies with all applicable rules within the European Union
"The way we have been assessed by the national authorities is, in our view, in line with EU rules," IKEA said, adding that it is available to cooperate.
At issue in the investigation are two tax agreements granted by the Dutch authorities in 2006 and 2001 to Inter IKEA Systems, the subsidiary of the Inter IKEA group in the Netherlands which receives fees charged to all IKEA stores.
This is because, since the early 1980s, IKEA’s business model is one of franchising, with all of the stores paying 3% of their turnover to Inter IKEA Systems, which owns Concept Ikea and is the franchisor of all the IKEA stores.
Inter IKEA Systems in the Netherlands receives all the franchise fee revenues from IKEA stores worldwide.
"The Commission's investigation concerns the tax treatment of Inter IKEA Systems in the Netherlands since 2006. Our preliminary investigations indicate that two tax decisions, granted by the Dutch tax authorities in 2006 and 2011, have significantly reduced Inter IKEA Systems' taxable profits in the Netherlands," read today’s statement.
