McDonald's under EU investigation over Luxembourg tax deals

Thu Dec 3, 2015 12:07pm EST
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By Foo Yun Chee

BRUSSELS (Reuters) - EU regulators are to investigate tax deals between McDonald's (MCD.N: Quote) and Luxembourg which enabled the U.S. chain to escape paying taxes on European franchise royalties from 2009, a move which could lead to hefty back taxes for the company.

Confirming what sources with knowledge of the matter previously told Reuters, the bloc's antitrust regulators said on Thursday they would launch the probe into arrangements which could be defined as illegal state aid.

The investigation comes two months after the European Commission ordered Luxembourg to recover up to 30 million euros ($32 million) from Fiat Chrysler Automobiles (FCHA.MI: Quote), and the Dutch to do the same for Starbucks (SBUX.O: Quote), because of tax deals seen as unlawful aid.

The EU competition enforcer said McDonald's had not paid any corporate taxes in Luxembourg or the United States on royalties paid by franchisees in Europe and Russia since 2009, as a result of two tax rulings by the Luxembourg authorities.

"We decided to open an investigation into two Luxembourg tax rulings to McDonald's because we have the concern that those two rulings have resulted in ... double non-taxation, and that may be state aid," Competition Commissioner Margrethe Vestager told Reuters.

"This is not a question of the Luxembourg tax regime or their rules, this is a question of how rules are actually applied," Vestager said.

Luxembourg's finance ministry said the country had granted no special tax treatment or selective advantage to McDonald's and would cooperate fully with the investigation.

McDonald's said it complied with all tax rules in Europe and that its companies had paid more than 2.1 billion euros in corporate taxes in the EU from 2010 to 2014, with an average tax rate of almost 27 percent.   Continued...

The sign for McDonald's in Times Square is seen in New York July 23, 2015.  REUTERS/Brendan McDermid