Amazon News: Company Defeats Major IRS Appeal

Amazon secured a major legal victory on Friday, defeating $1.5 billion IRS appeal in relation to its tax treatment of its Luxembourg-based Amazon Europe Holding Technologies SCS.

The IRS was seeking to broaden the definition of “intangible assets,” which Amazon transferred to the subsidiary in 2005 and 2006. The result of this would have been increased the e-commerce giant’s tax bill.

The 9th U.S. Circuit Court of Appeals in Seattle voted 3-0 to uphold a 2017 ruling on the definition of intangible assets. These kind of assets are defined as things like customer lists, intellectual property, and software. The court explained that entities like Amazon could move its intangible assets overseas as long as it is done at arms-length and as long as intangible development costs are paid.

The IRS had proposed that intangible assets should be expanded to include “more nebulous” things like the value of Amazon’s goodwill, employees, and “culture of innovation.” Circuit Judge Consuelo Callahan ultimately favored Amazon’s more concrete definition.

According to Reuters, Amazon stated that it established this European subsidiary in Luxembourg because of its central location and low value-added and corporate tax rates.

Even when money is made abroad, U.S. companies still pay income tax domestically. Amazon said that it would face major tax liabilities if the court had reversed its earlier ruling.