Nike’s Dutch tax status reviewed by EU regulators
BRUSSELS (Reuters) – The European Commission has opened an investigation into the tax treatment of Nike Inc NKE.N in the Netherlands, claiming it could have given the US sportswear manufacturer an illegal advantage.
The Nike affair, announced Thursday, follows other investigations carried out by the EU executive since 2013 into tax regimes in Belgium, Gibraltar, Luxembourg, Ireland and the Netherlands which it says allow companies to put in place structures to reduce their taxes unfairly.
Countries have been ordered to recover the tax from beneficiaries of these schemes, including Amazon AMZN.O, Apple AAPL.O, Starbucks SBOX.O and Fiat FCHA.MI.
The Commission said in a statement that the Dutch authorities had issued five tax rulings from 2006 to 2015, two of which are still in force, approving a method for calculating royalties paid to two Nike entities based in the Netherlands.
The EU executive, which oversees competition policy in the 28-member European Union, said at this point it was concerned that the royalty payments approved by the decisions “do not reflect economic reality. “.
“Member states should not allow companies to put in place complex structures that unduly reduce their taxable profits and give them an unfair advantage over their competitors,” EU Competition Commissioner Margrethe Vestager said in a statement.
Nike has said it is submissive and made sure to comply with all of the same tax laws as other companies operating in the Netherlands.
“We believe that the European Commission investigation is without merit,” said a spokesperson for Nike.
The Dutch finance ministry said it would cooperate with the Commission’s investigation and said it agreed that tax rulings should provide certainty and not preferential treatment.
The Commission has pushed governments to toughen tax rules in response to the LuxLeaks and Panama and Paradise Papers revelations, but some countries have resisted the EU-wide changes.
Vestager said she welcomed steps the Netherlands has taken to reform their corporate tax rules and to help ensure that businesses operate on an equal footing.
The Commission said its new investigation concerned the tax treatment of two Netherlands-based Nike companies – Nike European Operations Netherlands BV and Converse Netherlands BV – which market and record sales in Europe, the Middle East and Africa.
They were granted licenses to use the intellectual property rights of Nike and Converse products in the region in exchange for tax-deductible royalty payments to two other Nike entities also based in the Netherlands, but not taxable there.
The Commission said royalty payments appeared to be higher than what independent companies would have agreed between themselves. As a result, the Netherlands may have allowed Nike companies to pay a lower amount of tax. If this were confirmed, it would amount to illegal state aid.
The Commission will allow the Netherlands and interested parties to submit comments.
The Commission is also carrying out an in-depth investigation into the Dutch tax rulings in favor of IKEA and an investigation into a tax regime for multinationals in Great Britain.
Reporting by Philip Blenkinsop; additional reporting by Emma Thomasson in Berlin and Anthony Deutsch in Amsterdam; edited by Francesco Guarascio and Jane Merriman