Amazon won an appeal: sued by the U.S. government for tax avoidance by transferring assets

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[Summary] On August 16, Amazon rejected the IRS appeal in the Court of Appeal. The lawsuit involved some transactions between Amazon and its European Luxembourg subsidiary, with a tax dispute amounting to $1.5 billion.
Tencent Technologies has had some tax disputes with Amazon, the world’s largest e-commerce company, whether in the European Union or in the United States. American politicians have criticized Amazon for not paying any federal taxes.
According to the latest news from foreign media, Amazon rejected the IRS appeal in the Court of Appeal on August 16. The lawsuit involved some transactions between Amazon and its European Luxembourg subsidiary, with a tax dispute amounting to $1.5 billion. The IRS believes that Amazon has transferred some assets to Luxembourg, thereby avoiding some tax obligations.
According to foreign media reports, the Ninth Circuit Court of Appeal in Seattle, Washington, upheld Amazon’s decision of transferring intangible assets to Amazon Europe Holdings Ltd. in 2005 and 2006 in 2017 by three votes in favor and none against it. This means that the IRS appeal was rejected.
It is reported that intangible assets involved in litigation include customer lists, intellectual property rights and software projects. The Court of Appeal rejected a broader definition of intangible assets sought by the IRS, which would increase Amazon’s tax burden in the United States.
Amazon said it chose Luxembourg as its European headquarters because of its central location in Europe, its lowest value-added tax rate in Europe and its relatively low corporate income tax rate.
The Seattle-based company has warned that it may face “significant” new tax liability if the tax court ruling is overturned or if the IRS approach applies to other tax years.
According to the data, Amazon’s net profit in 2018 was $10.07 billion, compared with $6.19 billion from January to June.
The U.S. Department of Justice, representing the IRS, did not immediately respond to requests for comment. Amazon and its lawyers did not immediately respond to similar requests.
According to foreign media reports, some American multinational companies make profits overseas, but they often pay corporate income tax in the United States.
But according to the Court of Appeal, U.S. tax regulations allow companies such as Amazon to transfer intangible assets to foreign subsidiaries, provided that they are independently completed and that these subsidiaries bear their own intangible development costs.
Consuelo Callahan, a judge at the Circuit Court of Appeals, said the history of drafting the rules and the ideas of the U.S. Treasury strongly supported Amazon’s argument that “intangible” assets were limited to “independent transferable” assets.
The judge rejected the IRS proposal for a definition of intangible assets, which also included what she called “more ambiguous” assets, including Amazon’s goodwill, employee value and “culture of innovation”.
Carahan also added that the U.S. Congress changed the definition of intangible assets in its tax reform in 2017, and if the new definition applies to Amazon’s case, the IRS’s position is “beyond doubt” correct.
Previously, Amazon paid zero federal taxes for two consecutive years, which aroused public doubts and criticism from American politicians. As report goes. Amazon earned more than $10 billion in net profit in 2018 and $5.6 billion in net profit in 2017. After enjoying federal tax credits and deducting equity compensation in the United States, Amazon has not paid a penny of federal government income tax for two consecutive years, and the corporate tax rate at the federal level is negative.
In Europe, Amazon has also been investigated and criticized for tax avoidance in the past. An investigation by the European Commission found that Amazon had evaded taxes illegally in Luxembourg. The European Commission asked Amazon to pay about $300 million in taxes to the Luxembourg government.
In addition, the European Union also ruled that Apple violated tax evasion in Ireland, requiring Apple to pay about $15 billion in historical tax arrears to the Irish government. (Tencent Technology Revision/Chengxi)