Amazon starts booking revenue in European countries

25 May 2015

After coming under severe criticism regarding its practices in Europe, e-commerce major Amazon has started booking revenue from retail sales in individual European countries, instead of from tax-free Luxembourg.

According to The Wall Street Journal, which cited sources, the company had stopped the practice of funneling all sales through Luxembourg a low-tax haven that served as the centre of European operations for Amazon and many other tech companies. Under the scheme, the online retailer had saved billions of dollars in European taxes.

The company had rolled out the accounting changes in the UK, Germany, Italy and Spain, according to a person familiar with the matter who spoke to the newspaper.

The retailer had since 1 May, operated a London branch of its Luxembourg operation, allowing HM Revenues and Customs to collect the correct tax on profits associated with UK sales.

The move comes as several US firms faced intense scrutiny over their corporate tax practices in Europe.

The move would boost the  company's tax bill in the region substantially and also force other foreign firms to follow suit.

The retailer, much like other multinational firms, had sparked outrage by setting up complex tax schemes which helped its massive sales in the UK its third-largest market to be taxed in Luxembourg, where rates were considerably lower.

Meanwhile, according to The Guardian, the move comes in response to the UK government's diverted profits tax, which slapped a 25-per cent tax on groups routing profits overseas. With the booking of sales in the UK, rather than Luxembourg, Amazon would avoid the diverted profits tax, and might have to pay some extra corporate tax in the UK.

Amazon had for the last 11 years, booked its UK sales through Luxembourg, which The Guardian estimates might have amounted to 4.71 billion in 2013.

Although Amazon attributed that aforementioned 4.71 billion of sales in 2013 to customers in the UK, its Ltd wing filed accounts recording just 449 million in revenue for the year, and paid 4.2 million in corporation tax to the UK's HMRC.

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