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EU investigates Nike tax structure in the Netherlands

The European Commission has launched an in-depth investigation into whether Nike unfairly benefitted from tax rulings in the Netherlands.The Commission will investigate carefully the tax treatment of Nike in the Netherlands, to assess whether it is in line with EU State aid rules.

The Dutch government determined, over five rulings made from 2006 to 2015, that the royalty would be calculated based on a limited operating margin that was based on sales in the country. The Commission said those rulings “may not reflect economic reality” and that the tax breaks Nike receives in the Netherlands are higher than what independent companies would normally negotiate based on market terms in harmony with the arm’s length principle.

The Netherlands has already agreed to an update of its tax code. The Commission revealed that the Dutch government has announced plans to reform and tighten requirements for tax rulings on international structures—especially if the ruling is meant to allow that structure to avoid EU or Dutch taxes.

The Commission has made a number of high-profile rulings on tax codes in recent years, often going after American companies like Apple, Starbucks and McDonalds. In 2017, for one, the Commission found that Amazon had skirted Irish tax laws, and, in turn, it recovered 282.7 million euros ($325.25 million) from the company.