EU: Commission says McDonald’s Luxembourg tax deal not illegal

Fast food restaurant chain McDonald’s avoided having to repay millions of euros in back taxes after EU antitrust regulators announced that its tax deal with Luxembourg was not illegal, citing issues in the Grand Duchy’s bilateral tax treaty with the United States.

The decision announced on Wednesday, September 19, is the first formal investigation in EU Competition Commissioner Margrethe Vestager’s five-year crackdown on tax rulings where she concluded that an arrangement was not illegal under the EU’s state-aid rules.

Vestager said the in-depth investigation had found the reason for double non-taxation was “a mismatch between Luxembourg and US tax laws, and not a special treatment by Luxembourg.”

“The good thing about this outcome is of course that it’s a case that proves that we don’t see state-aid where there is no state-aid,” Ms. Vestager said.

Rather than state aid, the Commission found tax loopholes that had allowed a McDonald’s franchising unit to avoid paying taxes on either side of the Atlantic. Ms. Vestager said Luxembourg’s treatment of McDonald’s defies tax fairness, but doesn’t amount to a special deal because it is in line with a US-Luxembourg double-taxation treaty. Luxembourg is now changing its domestic tax laws to close loopholes.

Full Content: Wall Street Journal