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Brussels - Online retailer Amazon's tax arrangements with Luxembourg are being investigated by European regulators, becoming the latest global company accused of cutting deals with member states to gain an effective subsidy.
The European Commission opened an in-depth investigation into the US company on Tuesday to examine whether it has complied with the bloc's rules on state aid. There was no immediate comment from Amazon or Luxembourg.
The EU competition authority said that Luxembourg's 2003 tax ruling for Amazon's local subsidiary Amazon EU Sarl allowed the company to pay a royalty to its parent, which reduced its taxable profit and might not be in line with market conditions.
It said that this could give Amazon an economic advantage by allowing the group to pay less tax than other companies.
Companies found guilty of breaching EU rules on state aid could be forced to repay what Brussels determines to have been the amount of support given.
Amazon joins fellow US company Apple in the Commission's sights after the watchdog accused Ireland of swerving international tax rules in its tax arrangements with the iPhone manufacturer.
The Commission is also investigating similar deals between coffee chain Starbucks and the Netherlands and Luxembourg tax rulings received by a subsidiary of Italian carmaker Fiat.
This YouTube video attempts to explain how tax havens work:
