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Amazon Changes EU Tax Structure to Book Revenue in Countries where Customers are Located — Orbitax Tax News & Alerts

Amazon is changing its EU business structure so that it books retail sales in the UK and other EU jurisdictions instead of in Luxembourg, an Amazon spokesman confirmed.

Starting 1 May 2015, Amazon EU Sàrl is recording retail sales made to customers in its branches established in the UK, Germany, Spain, and Italy, the company said in a statement, adding that those retail sales had previously been recorded in Luxembourg.  

Some media reports have described Amazon's decision to restructure as a sign that the company is caving in to pressure from the EU and international efforts to curb corporate tax avoidance under the OECD's base erosion and profit-shifting project.  However this move could be also designed to allow Amazon to avoid being caught by chancellor George Osborne’s new diverted profits tax (DPT), which came into law from April 1, 2015. It imposes a punitive 25% tax on groups deemed to be artificially routing profits overseas. The DPT is levied on profits derived from the UK by a company that has either structured its operations to avoid creating a permanent establishment or made payments to a related company under an arrangement that lacks economic substance.

EU VAT rules on e-book sales may also have influenced Amazon's decision. One possible reason Amazon chose Luxembourg for its European headquarters could have been the country's low 3% VAT rate on e-books. However, the special VAT rate no longer applies because of a new destination rule for the place of electronic supplies in the EU, so now there's no real advantage of being headquartered in Luxembourg.

In 2013 Amazon.co.uk Ltd reported sales of just GBP 449 million and a tax charge of GBP 4.2 million. Elsewhere in its corporate filings, however, Amazon attributed USD 7.29 billion (GBP 4.71 billion) of worldwide net sales to the UK for 2013.

The UK business employs thousands of staff, many on low wages, in its network of warehouses, as well as a large number in sales, procurement and marketing activities. However, before the current change, the UK business revenue came from services provided to Amazon EU Sàrl, and the UK business did not transact directly with British online customers.