Billion-dollar tax shield of Amazon

This cuts the effective tax rate to below 6%. Tax advisers and academics say rates close to zero can be achieved using other methods.

In June 2003, Amazon registered Amazon Services Europe SARL in Luxembourg with the initials Societe a Responsabilite Limitee — a limited company, liable for tax.

A month later, it told clients in the UK its terms were changing. Contracts with third-party retailers who used Amazon to sell their products would no longer be handled in the US but with the Luxembourg unit. In June 2004, Amazon established another Luxembourg entity — Amazon Europe Holding Technologies — whose purpose was to hold shares in Amazon group companies and “to acquire ... any intellectual property rights, patents, and trademarks licenses and generally to hold, to license the right to use it solely to one of its direct or indirect wholly owned subsidiaries.”

This group was set up as a “Societe en Commandite Simple” or SCS, a type of limited partnership that a Luxembourg government spokesman said is exempt from income taxes. It has not had any operational staff or premises, its registered address being the offices of a trust services company in an upmarket residential area west of Luxembourg’s old town.

A month later, this company established a third Luxembourg company, Amazon EU SARL, whose principal purpose was to sell, auction, rent or otherwise distribute products or services of all types via Amazon websites.

This taxable unit was to become, on

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