The rights SCS owns are licensed to a Luxembourg tax resident company, Amazon EU Sarl. Sarl had a transfer pricing agreement with SCS, approved by Luxembourg, that in effect meant that all the profit flowed back to the SCS and so offshore and so became untaxed. The challenge that the EU will consider today is whether that price from Sarl to SCS was fair. And it is thought they will say it was not and as such Sarl has much more profit and so a tax liability. The likelihood is that Luxembourg will object, just as Ireland is objecting to collecting tax from Apple.
That’s the technicalities. What are the issues? There are several. First, this is a structure created soon after the turn of the century. To be candid, it’s blatant, aggressive and very obviously created with one goal in mind. And back then no one thought anyone would have the temerity to challenge it. Times have changed. I doubt anyone would try a structure quite as blatant as this now. Let’s celebrate progress.
The structure is entirely fine. It’s only the price which is at issue.