McDonald's faces EU back tax bill of up to $500m

If it is found to have broken Europe's tax rules...

McDonald's faces EU back tax bill of up to $500m

McDonald's, YouTube

McDonald's is facing a tax bill of up to $500m as the European Commission investigates the company's tax payments in Luxembourg.

The Financial Times has been crunching the numbers, its review found that the company paid an average tax rate of 1.49% on profits of $1.8bn earned by its headquarters in Luxembourg since it was reorganised in 2009.

The standard tax rate in Luxembourg is 29.2% - the FT reports that if the European Commission judges that its rules have been broken, and it follows the blueprint of the EU's treatment of Apple's payments in Ireland, the fast food chain will be required to pay half a billion USD in back taxes.

McDonald’s has defended its practices and said, "We pay the taxes that are owed and have not received any preferential treatment."

It continued to highlight the fact that between 2011-2015 it paid more than $2.5bn in corporation tax across the EU - with an average rate of almost 27%.

The EU began its investigation shortly after the 'Luxleak' papers were published in late 2015 - they focused international attention on corporate tax payments in the Grand Duchy.

"A tax ruling that agrees to McDonald’s paying no tax on their European royalties either in Luxembourg or in the US has to be looked at very carefully under EU state aid rules," Competition Commissioner Margrethe Vestager said when the probe was launched.

"The purpose of double taxation treaties between countries is to avoid double taxation — not to justify double non-taxation," she continued.