Ikea could face large EU back-tax bill

Swedish furniture giant Ikea is facing the possibility of having to pay millions of euros in back taxes, as the European Commission nears its investigation into the company.

According to CityAm, the two-year probe into Ikea, which was launched after its parent company Inter Ikea was found to have avoided paying €1bn (£895m) in taxes over a six year period, is focused on its operations in the Netherlands.

This is due to the fact that Ikea runs its store franchise business and tracks its revenues from its global franchise fees in the country.

The watchdog said that two rulings granted by Dutch authorities in 2006 and 2011 have given the retailer an unfair advantage over its competition by reducing its taxable profits in the Netherlands.

The rulings have allowed Ikea to move some of its franchise profits to Luxembourg where it was not taxed, later allowing it to also move them to a parent company based in Liechtenstein.

In response, Ikea told Reuters: “Just like all other companies working under the IKEA trademark, Inter IKEA Systems B.V. is committed to paying taxes in accordance with laws and regulations wherever we operate. We believe that we also in these cases have paid the correct amount of tax.”

Retail Sector has contacted Ikea for comment.