The victory follows last year’s landmark defeat for Vestager against Apple, which had contested an order that it pay 13 billion euros ($15 billion) in Irish back taxes.
Both Amazon and Apple were targeted by Vestager in a campaign to stamp out tax deals used by EU states such as Ireland, Luxembourg and the Netherlands to attract large companies. The Commission views such agreements as unfair.
“The Commission did not prove to the requisite legal standard that there was an undue reduction of the tax burden of a European subsidiary of the Amazon group,” the Luxembourg-based EU judges said.
Amazon in a statement welcomed the ruling, saying it was in line with its “long-standing position that we followed all applicable laws and that Amazon received no special treatment”.
Vestager said she would examine the ruling before deciding whether to appeal to Europe’s top court. [B5N2GD001]
It wasn’t all bad news for Vestager. In a separate case on Wednesday, French utility Engie lost its appeal against an EU order to pay back taxes of 120 million euros to Luxembourg.
But the spotlight was on the Amazon decision, which was criticised by groups campaigning for higher taxes to be levied on multinationals.
“Today’s ruling is a blow,” said Chiara Putaturo, a tax expert with Oxfam EU. “It shows again that case-by-case investigations do not solve large-scale tax dodging.”
The amount at stake in the Amazon decision was tiny compared to the billions of dollars the online retailer earns each quarter but the decision could help other companies in their appeals against the bloc’s tax probes.
Vestager has successfully made Belgium, Ireland, Luxembourg and the Netherlands change their tax ruling practices, and spurred the Organisation for Economic Cooperation and Development (OECD) to aim for a global deal on how multinational companies are taxed.
The OECD said last week that the chances of a global deal had never been higher.
The European Commission in its 2017 ruling, knocked down on Wednesday, said Luxembourg spared Amazon from paying taxes on almost three-quarters of its profits from EU operations by allowing it to channel profits to a holding company tax-free.
In its 2018 decision on Engie, the EU said the arrangement with Luxembourg authorities artificially reduced the company’s tax burden, which meant it paid an effective corporate tax rate of 0.3% on certain profits in Luxembourg for about a decade.
The court sided with the Commission, saying the French utility had benefited from a tax advantage.
The cases are T-816/17 Luxembourg v Commission & T-318/18 Amazon EU v Commission.
($1 = 0.8243 euros)
(Additional reporting by Marine Strauss; editing by Barbara Lewis and Carmel Crimmins)