Amazon's Latest Tax Penalty Should Be a Red Flag for Tech Companies

The European Commission recently fined Amazon (NASDAQ: AMZN) 250 million euros ($294 million) to cover unpaid back taxes plus interest. The EU alleges that Luxembourg's government illegally allowed Amazon to set up subsidiaries that were designed to minimize its taxes.

Most of Amazon's European profits are sent to Luxembourg-based subsidiary Amazon EU SARL. That subsidiary pays royalties to another Amazon subsidiary, Amazon Europe Holding Technologies, which is exempt from corporate taxes. The commission claimed that Amazon intentionally inflated those royalties to reduce taxes on Amazon EU SARL.

Image source: Amazon.

Source: Fool.com