Amazon avoids $1.5bn tax bill after judge rules its dealings with 'tax haven' Luxembourg were legal

Amazon had been paying tax on its European sales through a low-tax Luxembourg sub-company

Amazon has avoided a $1.5bn (£1.2bn) tax bill in the US after a court ruled that it was legal for the online retailer to have paid tax on its European sales through a Luxembourg sub-company.

The lengthy court battle between Amazon and the Internal Revenue Service (IRS) came to a conclusion after Judge Albert Lauber ruled in favour of Amazon.

In his ruling Lauber said it was legal for Amazon to have funnelled its European sales through a low-tax Luxembourg sub-company in 2005 and 2006, rather than pay the tax in the US.

Had Amazon lost the case it would have been facing a US tax bill of around $1.5bn and could have been forced to deal with "“significant” tax liabilities for several years .

Colin Sebastian, an analyst at Baird Equity Research told Reuters the ruling “should shield Amazon from potentially significant tax obligations to the IRS covering years beyond the ones covered in the lawsuit."

The company may not be clear of tax lawsuits yet though, Brussels could yet take further action over European tax bills.

A number of major global companies such as Pepsi and Apple have made use of Luxembourg's favourable tax. Known as one of the world's biggest tax havens, the country offers heavy discounts on corporate taxes.

Get The Drum Newsletter

Build your marketing knowledge by choosing from daily news bulletins or a weekly special.