The European Union has told Amazon to repay €250 million (US$293 million) in taxes that it says the company received due to sweetheart deals with Luxembourg.
In a statement issued on Wednesday, the European Commission, the EU's executive arm, said it had concluded that Luxembourg granted "undue tax benefits" of about €250 million to Amazon.
"This is illegal under EU state aid rules because it allowed Amazon to pay substantially less tax than other businesses. Luxembourg must now recover the illegal aid," the statement said.
Amazon is the third American multinational technology company to face the wrath of the EU over the last 14 months.
{loadposition sam08}Apple was the first to be targeted, with the EU ordering the company last August to pay €13 billion (US$17.6 billion) after the bloc said it had found that a number of deals the company cut to do business in Ireland were illegal.
Margrethe Vestager: "Member states cannot give selective tax benefits to multinational groups that are not available to others."
Google was hit with a fine of €2.42 billion (US$2.7 billion) in June for allegedly using its search engine dominance to favour itself in its comparison shopping service.
The EU said in July that Google could also face a fine over how it pays and limits mobile phone providers who use its Android mobile operating system and app store. A third investigation, into Google's Adsense advertising service, may also bring a fine; the EU is said to have made a preliminary determination that Google has abused its dominant position.
EU commissioner Margrethe Vestager, who is in charge of competition policy, said on Wednesday: "Luxembourg gave illegal tax benefits to Amazon. 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. This is illegal under EU State aid rules. Member states cannot give selective tax benefits to multinational groups that are not available to others."
The statement said that after an investigation was launched in 2014, the EC had concluded that a Luxembourg tax ruling of 2003 and extended in 2011 lowered the amount of tax that Amazon had to pay in the country without justification.
"The tax ruling enabled Amazon to shift the vast majority of its profits from an Amazon group company that is subject to tax in Luxembourg (Amazon EU) to a company which is not subject to tax (Amazon Europe Holding Technologies)," the statement said.
"In particular, the tax ruling endorsed the payment of a royalty from Amazon EU to Amazon Europe Holding Technologies, which significantly reduced Amazon EU's taxable profits."
While Amazon EU operates the retail business throughout the EU and had more than 500 employees in 2014, Amazon Europe Holding Technologies is a limited partnership with no employees, no office and no business activities.
Photos and graphic: courtesy the European Commission