The European Commission has opened an investigation into whether Dutch Nike tax arrangements are compliant with EU state aid regulations.
Nike European Operations Netherlands BV and Converse Netherlands BV, both subsidiaries of Nike, appear to have benefited from tax rulings by the Dutch tax authorities which may be considered unduly favourable. The Commission is particularly concerned that royalty payments made by the subsidiaries to their parent company – royalty payments on intellectual property are tax deductible in the Netherlands – seem to have been higher than comparable payments made by independent companies in the marketplace, leading to the suggestion that Dutch Nike tax arrangements have led to Nike paying a disproportionately low rate of tax in the Netherlands based solely on their sales.
Margrethe Vestager, Commissioner in charge of competition policy, said: “Member States should not allow companies to set up complex structures that unduly reduce their taxable profits and give them an unfair advantage over competitors. The Commission will investigate carefully the tax treatment of Nike in the Netherlands, to assess whether it is in line with EU State aid rules. At the same time, I welcome the actions taken by the Netherlands to reform their corporate taxation rules and to help ensure that companies will operate on a level playing field in the EU.”
A preliminary analysis of Dutch Nike tax arrangements, conducted by the European Commission, found that Nike’s and Converse’s Netherlands operations were closely involved in the “development, management and exploitation” of the intellectual property they were allegedly paying royalties for, while the Nike entities receiving the royalties retained no employees and did not carry out any economic activity.
The Commission’s full investigation into Dutch Nike tax arrangements will examine to what degree Dutch authorities’ authorisation of the royalty payments may have granted Nike an unfair advantage over competitors by reducing their taxable base. If it is found that Nike were accorded a favourable rate of tax, the Netherlands will be found to have been in breach of the EU’s state aid rules and Nike may be compelled to repay tax dating back to 2006.
