The European Commission (EC) here on Tuesday opened another in-depth investigation into possible state aid granted by Luxembourg through a tax advantage to the large multinational company of Amazon.

According to a EC press release, the probe will examine whether the decision by Luxembourg's tax authorities with regard to the corporate income tax to be paid by Amazon in Luxembourg comply with the EU rules on state aid.

EC Vice President in charge of competition policy Joaquin Almunia said that national authorities must not allow selected companies to understate their taxable profits by using favorable calculation methods. It is only fair that subsidiaries of multinational companies pay their share of taxes and do not receive preferential treatment which could amount to hidden subsidies.

This investigation concerning tax arrangements for Amazon in Luxembourg adds to EU's other in-depth investigations launched in June.

The tax ruling in favor of Amazon under investigation dates back to 2003 and is still in force. It applies to Amazon's subsidiary Amazon EU Sarl, which is based in Luxembourg and records most of Amazon's European profits.

Based on a methodology set by the tax ruling, Amazon EU Sarl pays a tax deductible royalty to a limited liability partnership established in Luxembourg but which is not subject to corporate taxation in Luxembourg. As a result, most European profits of Amazon are recorded in Luxembourg but are not taxed in Luxembourg.

At this stage the Commission considers that the amount of this royalty, which lowers the taxable profits of Amazon EU Sarl each year, might not be in line with market conditions.

In this June the Commission therefore initiated infringement proceedings against Luxembourg. The Commission will now continue investigating to determine whether its concerns are confirmed. Endit