On December 18, 2017 the European Commission announced that it opened a has opened an in-depth investigation into the Dutch tax treatment of Inter IKEA. More precise the European Commission is going to investigate whether the transfer prices reflect economic reality (in line with arrangements that take place under comparable conditions between independent companies). Therefore the European Commission is going to investigate two tax rulings that Inter IKEA Systems concluded with the Dutch tax authorities. On ruling stems from 2006, the second one from 2011.
Ikea operates under a afranchising model. Under this model the Inter IKEA Group holds certain intellectual property rights required for the IKEA franchise concept. IKEA shops worldwide have a license to make use of this franchise concept. In return they pay franchise fee of 3% of their turnover to Inter IKEA Systems (a Dutch entity of the Inter IKEA Group).
Until 2011 I.I. Holding (a Luxembourg Inter IKEA entity) held certain intellectual property rights required for the IKEA franchise concept. These were licensed exclusively to Inter IKEA Systems. Inter IKEA Systems used these intellectual property rights to create and develop the IKEA franchise concept. In other words, it developed, enhanced and maintained the intellectual property rights. Inter IKEA Systems also managed the franchise contracts and collected the franchise fees from IKEA shops worldwide.
The 2006 tax ruling endorsed a method to calculate an annual licence fee to be paid by Inter IKEA Systems in the Netherlands to I.I. Holding.
On December 18, 2017 the European Commission announced that it will assess whether the annual licence fee paid by Inter IKEA Systems to I.I. Holding, endorsed in the 2006 tax ruling, reflects economic reality. In particular, it will assess if the level of the annual licence fee reflects Inter IKEA Systems' contribution to the franchise business.
In 2011 the Inter IKEA Group changed it’s structure. In 2011 Inter IKEA Systems bought the intellectual property rights from I.I. Holding. To finance this acquisition, Inter IKEA Systems received an interest-bearing intercompany loan from its parent company in Liechtenstein.
In 2011 Inter Ikea Systems and the Dutch tax authorities concluded tax ruling, which endorsed the price paid by Inter IKEA Systems for the acquisition of the intellectual property. It also endorsed the interest to be paid under the intercompany loan to the parent company in Liechtenstein, and the deduction of these interest payments from Inter IKEA Systems' taxable profits in the Netherlands.
On December 18, 2017 the European Commission announced that it will assess whether the price Inter IKEA Systems agreed for the acquisition of the intellectual property rights and consequently the interest paid for the intercompany loan, endorsed in the 2011 tax ruling, reflect economic reality. In particular, the Commission will assess if the acquisition price adequately reflects the contribution made by Inter IKEA Systems to the value of the franchise business, and the level of interest deducted from Inter IKEA Systems' tax base in the Netherlands.
The non-confidential versions of the decision will be made available under the case number SA.46470 in the State aid register on the Commission's competition website once any confidentiality issues have been resolved.
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