BRUSSELS – The European Commission has found that McDonald’s did not receive preferential tax treatment from the government of Luxembourg.
The ruling is the culmination of a nearly three-year investigation by the European Union’s Antitrust Commission which alleged that McDonald’s Europe Franchising had paid no corporate tax in Luxembourg or the United States since 2009. The investigation was part of a general crackdown on sweetheart tax deals for multinational companies.
In its finding, the Commission said non-taxation of certain McDonald’s profits in Luxembourg did not constitute illegal state aid and conformed with national tax laws and the Luxembourg-United States Double Taxation Treaty which exempts income from corporate taxation in Luxembourg, if that income may be taxed in the United States.
“The Commission investigated under EU State aid rules whether the double non-taxation of certain McDonald’s profits was the result of Luxembourg misapplying its national laws and the Luxembourg-US Double Taxation Treaty, in favor of McDonald’s, Commissioner Margrethe Vestager, in charge of competition policy, said in a statement. “EU State aid rules prevent Member States from giving unfair advantages only to selected companies, including through illegal tax benefits. However, our in-depth investigation has shown that the reason for double non-taxation in this case is a mismatch between Luxembourg and US tax laws, and not a special treatment by Luxembourg. Therefore, Luxembourg did not break EU State aid rules.”
However, Vestager noted that McDonald’s didn’t’ pay taxes on the company’s profits “…and this is not how it should be from a tax fairness point of view.”
Vestager lauded steps being taken by the Luxembourg government to address the issue. In June, the Luxembourg government submitted draft legislation to amend the country’s tax code to avoid cases of double non-taxation in the future. “Under the proposed new provision, the conditions to determine the existence of a permanent establishment under Luxembourg law would be strengthened,” the Commission explained. “In addition, Luxembourg would be able to, under certain conditions, require companies that claim to have a taxable presence abroad to submit confirmation that they are indeed subject to taxation in the other country.”