So said Sven Giegold, a Green Party MEP upon learning that the European Commission has dropped its investigation into McDonald's “double non-taxation” agreement with the Luxembourg tax authorities concluding that the non-taxation of McDonald’s profits in Luxembourg does not amount to illegal state aid, but rather derives from a difference in US and Luxembourg tax laws.The decision came after a three-year long investigation, part of its crackdown against illegal 'sweetheart' deals between EU governments and multinationals that has resulted in Apple, Starbucks and Fiat paying billions of euros in back taxes.The investigation had focused on McDonald’s Luxembourg-based subsidiary Europe Franchising which receives royalties from franchisees in Europe, Ukraine and Russia.McDonald’s Europe Franchising is a subsidiary of McDonald's Corporation, based in the United States. The company is tax resident in Luxembourg and has two branches, one in the US and the other in Switzerland.Luxembourg in a 2009 tax ruling said the company did not have to pay corporate taxes as its profits would be taxed in the United States. In a second tax ruling, the Grand Duchy said that the company was no longer required to prove that its royalty income was subject to U.S. taxation.Announcing the conclusion of the investigation, the Commission McDonald's tax deal with the Luxembourg tax authorities was in line with national tax laws and the Luxembourg-U.S. double taxation treaty.Commissioner Margrethe Vestager, in an accompanying press release, said:

“Our in-depth investigation has shown that the reason for double non-taxation in this case is a mismatch between Luxembourg and U.S. tax laws, and not a special treatment by Luxembourg. Therefore, Luxembourg did not break EU state aid rules,”“Of course, the fact remains that McDonald’s did not pay any taxes on these profits – and this is not how it should be from a tax fairness point of view,” she said.

Luxembourg said in a statement that it welcomed the Commission’s recognition of the steps it had taken to avoid similar cases in future. It had been ordered to claw back millions from Engie, Amazon, and Fiat in the last three years.Responding McDondald's also welcome the decision, stating;

“We pay the taxes that are owed and, from 2013-2017, McDonald’s companies paid more than $3 billion just in corporate income taxes in the European Union with an average tax rate approaching 29 percent”, adding;“We will continue to invest in Europe and expect to create 50,000 new jobs over the next four years.”

In June this year, Luxembourg presented draft legislation to avoid double non-taxation.The non-confidential versions of the decision will be made available under the case number SA.38945 in the State aid register on the Commission's competition website once any confidentiality issues have been resolved.Image courtesy of Pixaby licensed under Creative Commons CC0. BackgroundSince June 2013, the Commission has been investigating individual tax rulings of Member States under EU State aid rules. It extended this information inquiry to all Member States in December 2014.Regarding investigations concerning tax rulings that have already been concluded by the Commission:

• In October 2015, the Commission concluded that Luxembourg and the Netherlands had granted selective tax advantages to Fiat and Starbucks, respectively. As a result of these decisions, Luxembourg recovered €23.1 million from Fiat and the Netherlands recovered €25.7 million from Starbucks.
• In January 2016, the Commission concluded that selective tax advantages granted by Belgium to at least 35 multinationals, mainly from the EU, under its "excess profit" tax scheme are illegal under EU State aid rules. The total amount of aid to be recovered from 35 companies is estimated at approximately €900 million, including interest. Belgium has already recovered over 90% of the aid.
• In August 2016, the Commission concluded that Ireland granted undue tax benefits to Apple, which led to a recovery by Ireland of €14.3 billion.
• In October 2017, the Commission concluded that Luxembourg granted undue tax benefits to Amazon, which led to a recovery by Luxembourg of €282.7 million.
• In June 2018, the Commission concluded that Luxembourg granted undue tax benefits to Engie of around €120 million. The recovery procedure is still ongoing.

The Commission also has one ongoing in-depth investigation concerning tax rulings issued by the Netherlands in favour of Inter IKEA, and one investigation concerning a tax scheme for multinationals in the United Kingdom.