Skip to Main Content
 

Clark Armitage Comments on European Commission Details Challenging Luxembourg's Amazon Ruling

January 20, 2015, Worldwide Tax Daily

J. Clark Armitage spoke with Worldwide Tax Daily regarding the European Commission's recently released letter to Luxembourg which included preliminary findings that led to the formal state aid investigation of the 2003 tax ruling issued by the Grand Duchy to Amazon EU Sàrl. For the complete article, please visit Worldwide Tax Daily's website (subscription required).

Excerpt taken from the article "European Commission Details Challenge to Luxembourg's Amazon Ruling" by William Hoke and David D. Stewart for Worldwide Tax Daily.

J. Clark Armitage of Caplin & Drysdale told Tax Analysts that while the arrangement that allocated residual profits to AEHT and residual losses to Amazon EU is "atypical," there are some circumstances where it could make sense, such as an arrangement where there are only modest risks of loss.

"Many APAs determine a royalty for IP based on an appropriate range of operating profits expected to be earned by the licensee," Armitage said. "This makes sense where the functions of the licensee are easily benchmarked and the value of the IP can't readily be determined through the use of comparable uncontrolled transactions."

The commission also questioned the length of time the APA had been left unchanged, noting that it had been in place for more than a decade.

Armitage said there is precedent for long APAs, but that the letter does not provide enough information to show "whether a long tenure was consistent with the expectations of the parties."

"A longer tenure makes sense where the risks and profits associated with a business activity are expected to come to fruition over a longer period -- such as the life cycle of a pharmaceutical -- rather than on an annual basis," Armitage explained.
 

________________________________________________

About Caplin & Drysdale
Having celebrated our 50th Anniversary in 2014, Caplin & Drysdale continues to be a leading provider of tax, tax controversy, and litigation legal services to corporations, individuals, and nonprofits throughout the United States and around the world. We are also privileged to serve as legal advisors to accounting firms, financial institutions, law firms, and other professional services organizations.

The firm's reputation over the years has earned us the trust and respect of clients, industry peers, and government agencies. Moreover, clients rely on our broad knowledge of the law and our keen insights into their business concerns and personal interests. Our lawyers' strong tactical and problem-solving skills - combined with substantial experience handling a variety of complex, high stakes, matters in a boutique environment - make us one the nation's most distinctive law firms.

With offices in New York City and Washington, D.C., Caplin & Drysdale's core practice areas include:

-Bankruptcy
-Business, Investment & Transactional Tax
-Complex Litigation
-Corporate Law
-Employee Benefits
-Exempt Organizations
-International Tax
-Political Law
-Private Client
-Tax Controversies
-Tax Litigation
-White Collar Defense

For more information, please visit us at www.caplindrysdale.com.

Washington, DC Office:
One Thomas Circle, NW
Suite 1100
Washington, DC 20005
202.862.5000
        New York, NY Office:
600 Lexington Avenue
21st Floor 
New York, NY 10022
212.379.6000

___________________________

Disclaimer
This communication does not provide legal advice, nor does it create an attorney-client relationship with you or any other reader. If you require legal guidance in any specific situation, you should engage a qualified lawyer for that purpose. Prior results do not guarantee a similar outcome.

Attorney Advertising
It is possible that under the laws, rules, or regulations of certain jurisdictions, this may be construed as an advertisement or solicitation.

© 2017 Caplin & Drysdale, Chartered
All Rights Reserved.

Related Professionals

Related Practices