EU orders Amazon to pay 250 million euros in back taxes

Amazon faces a bill of at least 250 million euros (£221.5 million) in back taxes after the European Union ruled its tax affairs failed to comply with state aid rules.

It follows a three-year investigation into a sweetheart deal agreed in 2003 between the online retail giant and Luxembourg.

The EU Competition Commissioner Margrethe Vestager said Amazon's tax benefits were "illegal under EU state aid rules".

She added that the deal with Luxembourg substantially reduced the US online retailer's tax bill between May 2006 and June 2014.

"As a result, almost three quarters of Amazon's profits were not taxed. In other words, Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules.

The Commission said Luxembourg would now have to recover around £250 million euros plus interest from Amazon.

Ms Vestager said EU rules exist to prevent member states from "giving unfair advantages to selected companies".

She added that the ruling relates to Amazon EU and Amazon Europe Holding Technologies.

The Commission said that essentially due to the tax deal the online retailer was able to shift the majority of its profits from Amazon EU to Amazon Europe Holding Technologies, which was not subject to tax.

Subsequently Amazon was able to pay "substantially less tax than other businesses as a result".

The online retailer has also been under pressure over taxes in Britain and earlier this summer it was found to have paid 50% less UK corporation tax last year, despite a 54% jump in turnover.

Accounts filed by Amazon UK Services showed the company was billed £15.8 million in 2015 compared with £7.4 million in 2016.

Meanwhile, the Commission separately announced on Wednesday, that it was referring Ireland to the European Court of Justice for failing to recover unpaid taxes from Apple.

It comes after the US tech giant was hit with a 13 billion euro (£11.5 billion) tax bill in the wake of an investigation which found that Apple paid 50 euros in tax for every one million of profit made outside the US in 2014.

The Commission said Ireland had still not recovered the back taxes one year on.