A sign at Amazon.com, Inc.’s BHM1 fulfillment center can be seen before sunrise on March 29, 2021 in Bessemer, Alabama.

Patrick T. Fallon | AFP | Getty Images

LONDON – Amazon won its appeal on Wednesday against the European Commission that ordered the US tech giant to repay € 250 million in taxes to Luxembourg.

The EU court stated that the Commission, the EU’s executive branch, could not prove that Luxembourg granted Amazon an illegal tax break – where the US company has its European subsidiary.

The Brussels-based institution announced in 2017 that Luxembourg had granted Amazon inappropriate tax breaks. The commission said at the time that Amazon would be allowed to pay four times less tax than other local companies that are subject to the same national rules. However, Amazon denied this assessment.

“We applaud the court’s decision, in line with our longstanding position, that we have followed all applicable laws and that Amazon has not received special treatment,” a company spokesman told CNBC on Wednesday via email.

The European Commission was not immediately available for comment when it was contacted by CNBC on Wednesday. The institution may decide to appeal the judgment and take the case to the EU Supreme Court.

Why is it important?

The most recent court ruling is the second in less than a year to find that the Commission has not proven a tax advantage.

The EU court had already stated in July that the EU team led by Margrethe Vestager could not prove that the Irish government had given Apple a tax break. The commission had instructed Apple to repay around 13 billion euros in unpaid taxes in 2016.

The Commission has since decided to take this case to the European Court of Justice while also looking into ways how its toolkit can be sharpened to address what it calls unfair market competition.

In this context, the European legislators are currently debating two legislative proposals that could bring about far-reaching changes. According to these proposals, the EU’s aim is to enforce corrective action that will lead to practical changes, rather than penalizing those who continually violate the rules.