Nike's Dutch tax status to be investigated by European Commission

Emily Nicolle
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The Commission has said Nike may have paid less tax than it ought to (Source: Getty)

The European Commission has opened a detailed probe into whether Nike has received an unfair advantage over its competitors by being granted a favourable tax environment in the Netherlands.

The Commission said the Netherlands issued five tax rulings since 2006, two of which are still active, which endorsed a method of calculating royalty payments that "may not reflect economic reality".

"Member states should not allow companies to set up complex structures that unduly reduce their taxable profits and give them an unfair advantage over competitors," competition commissioner Margrethe Vestager said in a statement.

The Nike case follows other similar investigations by the Commission into tax schemes in Belgium, Gibraltar, Luxembourg and Ireland. Beneficiaries of such schemes have included Amazon, Apple, Starbucks and Fiat, reported Reuters.

A Nike spokesperson said it believes today's investigation is "without merit". The Dutch finance ministry has said it will cooperate with the investigation, and agreed that tax rulings should not provide preferential treatment.

The case concerns the tax treatment of two Nike group companies based in the Netherlands which develop, market and record the sales of Nike and Converse products in Europe, the Middle East and Africa.

The Commission alleged the two companies obtained licenses to use intellectual property rights in the region, in return for tax-deductible royalty payment to two other Nike entities also based in the Netherlands, but not taxable there.

It said preliminary findings suggested the royalty payments were higher than what independent companies would have agreed between themselves. As a result, the Netherlands may have allowed the Nike companies to pay a lower amount of tax. If this was confirmed, it would amount to illegal state aid.