State aid: Commission investigation did not find that #Luxembourg gave selective tax treatment to #McDonald’s

| September 21, 2018

The Commission has found that the non-taxation of certain McDonald’s profits in Luxembourg did not lead to illegal State aid, as it is in line with national tax laws and the Luxembourg-United States Double Taxation Treaty. Following an in-depth investigation launched in December 2015, based on doubts that Luxembourg might have misapplied its Double Taxation Treaty with the United States, the Commission has concluded that Luxembourg’s tax treatment of McDonald’s Europe Franchising does not violate the Double Taxation Treaty with the United States.

On that basis, the Commission found that two tax rulings granted by the Luxembourg authorities in 2009 that exempted McDonald’s Europe Franchising (a subsidiary of McDonald’s Corporation that is tax resident in Luxembourg) from corporate taxation in Luxembourg because the company’s profits may also be taxed in the United States do not infringe EU State aid rules. On 19 June 2018, the Luxembourg government presented draft legislation to amend the tax code to bring the relevant provision into line with the OECD’s Base Erosion and Profit Shifting project and to avoid similar cases of double non-taxation in the future. The Commission welcomes steps taken by Luxembourg to prevent future double non-taxation.

Commissioner Margrethe Vestager, in charge of competition policy, said: “The Commission investigated under EU State aid rules whether the double non-taxation of certain McDonald’s profits was the result of Luxembourg misapplying its national laws and the Luxembourg-US Double Taxation Treaty, in favour of McDonald’s. EU state aid rules prevent member states from giving unfair advantages only to selected companies, including through illegal tax benefits. However, our in-depth investigation has shown that the reason for double non-taxationin this case is a mismatch between Luxembourg and US tax laws, and not a special treatment by Luxembourg. Therefore, Luxembourg did not break EU State aid rules. Of course, the fact remains that McDonald’s did not pay any taxes on these profits – and this is not how it should be from a tax fairness point of view. That’s why I very much welcome that the Luxembourg Government is taking legislative steps to address the issue that arose in this case and avoid such situations in the future.”

The full press release is available online in EN, FR, DE.

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Category: A Frontpage, EU, European Commission, State aid