The EU is probing IKEA's Dutch tax arrangements

The European Commission's Vestager is set to launch a state aid probe against Ikea

Inter Ikea, based in the Netherlands, operates the Ikea franchise business.

The arrangement sees franchisees pay Netherlands-based Inter Ikea 3% of their turnover.

Between 2006-2011, the Netherlands subsidiary paid annual licence fees to a related Luxembourg company, I.I. Holding, which were likely deductible in the Netherlands. That ruling endorsed a model that allowed Inter Ikea to send a significant portion of its franchise profit, via interest paid under an intercompany loan, to a Liechtenstein company. This second tax ruling is also under investigation. The investigation will determine whether the company's tax structure is in breach of European Union rules on state aid.

Ikea has been accused of building its own tax rate. The EU will also look at a 2011 ruling on how the Dutch company paid tax on payments to a Liechtenstein unit.

The Commission is challenging whether the amounts paid by Systems were in accordance with the arm's length principle. Regulators will assess "if the level of the annual license fee reflects" the company's contribution to the franchise business.

Under EU law, governments can not give businesses selective tax benefits that are not available to other firms. This followed a decision in August 2016 that Ireland had granted €13 billion of unlawful state aid to Apple and earlier rulings concerning Starbucks and Fiat.

As such, this is a historical element of the case and not part of the investigation, the Commission said.

BEPS refers to the shifting of profits of multinational groups to low tax jurisdictions and the exploitation of mismatches between different tax systems so that little or no tax is paid.

Your local High Street furniture store has enough trouble competing with the likes of Ikea, with its massive stores, name recognition, buying power and marketing budget, without Ikea also having access to tax breaks that it could never use. Its final reports were published in October 2015 and the recommendations are now being implemented.

EU Competition Commissioner Margrethe Vestager said, "All companies, big or small, multinational or not, should pay their fair share of tax". Ms Vestager ruled in August a year ago that Ireland had granted the company illegal state aid in the form of generous tax benefits, which allowed the California-based company to pay nearly no tax on a significant proportion of its global sales.

In its press release, the Commission stated that it "has concerns that two [Dutch] tax rulings may have given Inter Ikea Systems an unfair advantage compared to other companies".

Ikea's tax arrangements with the Netherlands is under investigation as the European Commission broadens its crackdown on unfair tax deals and corporate tax avoidance, The Financial Times reported. State aid can occur whenever state resources are used to provide assistance that gives a company an advantage over others.

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