Industry & Business

EU launches investigation into McDonald’s Luxembourg tax deals

EU launches investigation into McDonald’s Luxembourg tax deals

EU launches investigation into McDonald’s Luxembourg tax deals
December 03
14:55 2015

The European Union commission has opened a formal state aid investigation into allegations that fast food giant McDonald’s received a tax deal from Luxembourg six years ago.

The case against one of the world’s most iconic companies adds to a series of probes launched last year following the LuxLeaks affair.

EU commissioner for competition Margrethe Vestager announced that the Luxembourg deal may have breached state aid rules, which seek to keep a level playing field for businesses across the 28 member states.

Under the terms of its Luxembourg tax ruling, McDonald’s Europe Franchising has not been required to pay tax locally because the grand duchy regards almost all of its profits to have been generated through the Luxembourg company’s US branch.

However, US tax rules offer a different view. Under American rules, the Luxembourg company’s profits should be taxed in Luxembourg, where the company is registered, not at its US branch office. As a result, the profits of McDonald’s Europe Franchising go untaxed by both Luxembourg and the US.

Margrethe Vestager, Europe’s competition commissioner, stated: “A tax ruling that agrees to McDonald’s paying no tax on their European royalties either in Luxembourg or in the US has to be looked at very carefully under EU state aid rules. The purpose of double taxation treaties between countries is to avoid double taxation – not to justify double non-taxation.”

Both Luxembourg and McDonald’s denied any wrongdoing.

“McDonald’s complies with all tax laws and rules in Europe and pays a significant amount of corporate income tax,” the company said in a statement.

It added that in the 2010-2014 period McDonald’s companies paid more than 2.1 billion US dollars in corporate taxes in the EU, with an average tax rate of almost 27%.

“We are subject to the same tax laws as other companies and are confident that the inquiry will be resolved favorably,” the statement said.

McDonald’s is the world’s leading global food service retailer with over 36,000 locations serving approximately 69 million customers in over 100 countries each day.

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