Ikea France (SNC MIF) had concluded a franchise agreement with Inter Ikea Systems BV (IIS BV) in the Netherlands by virtue of which it benefited, in particular, as a franchisee, from the right to operate the ‘Ikea Retail System’ (the Ikea concept), the ‘Ikea Food System’ (food sales) and the ‘Ikea Proprietary Rights’ (the Ikea trade mark) in its shops. In return, Ikea France paid Inter Ikea Systems BV a franchise fee equal to 3% of the amount of net sales made in France, which amounted to EUR 68,276,633 and EUR 72,415,329 for FY 2010 and 2011. These royalties were subject to the withholding tax provided for in the provisions of Article 182 B of the French General Tax Code, but under the terms of Article 12 of the Convention between France and the Netherlands: “1. Royalties arising in one of the States and paid to a resident of the other State shall be taxable only in that other State”, ... Read more

The tax administration had issued an adjustment to the taxable profit of IKEA’s subsidiary in Spain considering that taxable profit in years 2007, 2008, and 2009 had not been determined in accordance with the arm’s length principle. In 2007 taxable profits had been below the interquartile range and in 2008 and 2009 taxable profits had been within the interquartile range but below the median. In all years taxable profits had been adjusted to the median in the benchmark study. Judgement of the Court In regards to the adjustment mechanism – benchmark study, interquartile range, median – the Court provide the following reasoning “However, the OECD Guidelines in point 3.60 provide that “if the relevant terms of the controlled transaction (e.g. price or margin) are within the arm’s length range, no adjustment is necessary”. Conversely, under rule 3.61, if the relevant terms of the controlled transaction “(e.g., price or margin) are outside the arm’s length range determined by the tax administration, ... Read more

The European Commission has opened an in-depth investigation into the Netherlands’ tax treatment of Inter IKEA, one of the two groups operating the IKEA business. The Commission has concerns that two Dutch tax rulings may have allowed Inter IKEA to pay less tax and given them an unfair advantage over other companies, in breach of EU State aid rules. Commissioner Margrethe Vestager in charge of competition policy said: “All companies, big or small, multinational or not, should pay their fair share of tax. Member States cannot let selected companies pay less tax by allowing them to artificially shift their profits elsewhere. We will now carefully investigate the Netherlands’ tax treatment of Inter IKEA.” In the early 1980s, the IKEA business model changed into a franchising model. Since then, it has been the Inter IKEA group that operates the franchise business of IKEA, using the “IKEA franchise concept”. What this means more concretely is that Inter IKEA does not own the ... Read more

The French tax authorities had issued an assessment for the fiscal years 2002, 2003 and 2004 related to royalty fees paid by IKEA France to foreign group companies. It was claimed that the royalty fees paid were exessive. The Court reject the position of the authorities. It had not been proven that the fees paid by IKEA France to foreign IKEA companies were excessive based on the arm’s length principle and on Article 57 of the CGI. The Court stresses the irrelevance of the comparables presented by the administration: “Considering that the nine trademarks used as comparables by the administration relate to the French market, the furniture sector and distribution methods similar to that of Ikea; that, however, as the company Ikea Holding France argues, the Minister does not give any precise indication on the content of the services rendered to the franchisees of these trademarks in return for their royalty; these trademarks are notoriously inferior to Ikea’s and they ... Read more