The European Commission has launched an “in-depth investigation” into Nike’s tax treatment in the Netherlands.
The group, which oversees various policies in the 28-member EU, said today that it will examine whether tax rulings granted by the Netherlands to the global athletic behemoth may have given the company an unfair advantage over its competitors, breaching EU state aid rules.
“Member states should not allow companies to set up complex structures that unduly reduce their taxable profits and give them an unfair advantage over competitors,” said Margrethe Vestager, commissioner in charge of competition policy. “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. At the same time, I welcome the actions taken by the Netherlands to reform their corporate taxation rules and to help ensure that companies will operate on a level playing field in the EU.”
The commission said its investigation will center on two Nike group companies based in the Netherlands, Nike European Operations Netherlands BV and Converse Netherlands BV. Both entities develop, market and record the sales of Nike and Converse products in Europe, the Middle East and Africa.
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From 2006 to 2015, Dutch tax authorities issued five tax rulings, two of which are still in effect, approving a method to calculate the royalty paid by the two Netherlands-based Nike companies for the use of the intellectual property.
As a result of the rulings, Nike European Operations Netherlands BV and Converse Netherlands BV are taxed in the Netherlands on a limited operating margin based on sales, the commission said, adding that it is now “concerned that the royalty payments endorsed by the rulings may not reflect economic reality.”
“The commission investigation will focus on whether the Netherlands’ tax rulings endorsing these royalty payments may have unduly reduced the taxable base in the Netherlands of Nike European,” the executive body noted today.
In response to FN’s request for comment, Nike said it is “subject to and rigorously ensures that it complies with all the same tax laws as other companies operating in the Netherlands” and it believes the European Commission’s investigation “is without merit.”
Nike will join a growing list of mega firms — Apple, Starbucks and Amazon among them — that, since 2013, have faced scrutiny by the commission over their tax-paying practices. Many of those investigations have yielded multi-million dollar payouts to EU member countries from several major firms.
Starbucks had to fork over $25.7 million euros to the Netherlands in 2015 while Amazon shelled out $282.7 million euros to Luxembourg in 2017 as a result of a commission probe. In August 2016, Apple was ordered to pay out the largest sum among its peers when it handed over 14.3 billion euros to Ireland.
Still, not all companies investigated by the commission in recent years land in the same boat: McDonald’s was let off the hook in September when the regulators found that the non-taxation of some of its profits in Luxembourg did not lead to illegal state aid.
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