Huygens Quantitative Tax Consulting

Opinion Advocate General on the Amazon Luxembourg state aid case

13 June 2023 - Huygens' summary of the Advocate General's opinion on the Amazon Luxembourg state aid case.


On 8 June 2023, Advocate General (‘AG‘) Kokott’s opinion on the Amazon state aid case was published. The AG concludes that the advance pricing agreement (‘APA‘) concluded between Amazon and the Luxembourg tax authorities in 2003 does not constitute forbidden state aid, albeit on different grounds than the General Court of the European Union (‘General Court‘) in its decision of 12 May 2021. We refer to the press release issued by the Court of Justice of the European Union (‘CJEU‘) for a more detailed summary of the opinion.

The most relevant considerations of the AG’s opinion are that

  • the relevant reference system is Luxembourg law (instead of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (‘OECD TPG’) which was considered as the relevant reference system by the European Commission (‘EC’) and the General Court), and
  • it is not sufficient for the EC to demonstrate that the determination of the transfer prices in the APA contains errors; the EC should also have demonstrated that these errors resulted in Luxembourg giving Amazon a selective advantage (compared to the tax consequences under the reference system, even if that would be the reference system as determined by the EC).

Those in (transfer pricing) practice that advocate a static interpretation of the OECD TPG regarding the ‘DEMPE’ concept can find support in the positions taken by the General Court and the AG that the concept’s introduction was a change of the OECD TPG, instead of a clarification. We note, however, that these positions are within an EU state aid context, which is not necessarily the same as regular transfer pricing practice.

The relevant reference system is Luxembourg law

Even though the relevant reference system was not in dispute, the CJEU should – according to the AG – first determine this, as it is inextricably linked with the question of the existence of a selective advantage. Based on the CJEU’s ruling in the Fiat state aid case, the AG holds that the EC should have considered Luxembourg domestic law as the relevant reference system, Instead, the EC only referred to the OECD TPG as the reference system. That was wrong, because Luxembourg domestic law, nor its administrative practice, referred to the OECD TPG, at the time. This conclusion does not change, by the fact that Luxembourg’s administrative practice seemed to take the OECD TPG (1995) into account, because the OECD TPG were considered non-exhaustive, non-legally binding guidelines.

Application of more recent versions of the OECD TPG is not allowed

In addition, the EC’s repeated reliance on the versions of the OECD TPG which were published only in 2010/2017, is another indication for the AG to conclude that the EC did not base its arguments on the legal situation and administrative practice in Luxembourg in 2003. The AG disagrees with the EC that the 2010/2017 versions were de facto clarifications of the 1995 OECD TPG. By way of example, the AG considers the introduction of the so-called ‘DEMPE’ functions (Development, Enhancement, Maintenance, Protection and Exploitation) in 2017 – the very concept upon which the EC relied in its decision – as a specific change of the content laid down in previous versions of the OECD TPG.

The transfer pricing method applied should be manifestly incorrect or manifestly misapplied

If the OECD TPG were nevertheless the relevant reference system, the CJEU would only need to decide whether the method applied by the Luxembourg authorities (the CUP method in the present case) was manifestly incorrect or manifestly misapplied. AG Kokott found that this was not the case, as inter alia both methods are mentioned in the OECD TPG and no method has compelling priority. On this basis, the EC is therefore also unable to demonstrate that the APA had conferred a selective advantage to Amazon.


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Mark van Casteren

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Stephan Kraan

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