The EU Commission finds that the Luxembourg authorities’ non-taxation of a fast-food franchising relies on a correct interpretation of the Luxembourg-US Double Tax Treaty and therefore does not constitute illegal State aid (McDonald’s)

1. Parties McDonald’s Corporation and its subsidiaries franchise and operate tens of thousands of fast food restaurants worldwide. One of the subsidiaries is McD Europe Franchising, S.à.r.l. That company is a Luxembourg tax resident and following the example of the Commission, we will refer to it as “McD Europe”. 2. Facts McD Europe found a clever way to pay less taxes. It assigned a number of franchise rights to its branch in the US (hereinafter: “US Franchise Branch”) and collected the respective royalties through that branch. McD Europe’s tax advisor then argued that those profits should be exempt from taxation in Luxembourg. To that end, the tax advisor relied on the Luxembourg-US Double Tax Treaty. [1] According to that treaty, business profits of a Luxembourg enterprise that are

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Raf Magdelijns, Valentin Vandendaele, The EU Commission finds that the Luxembourg authorities’ non-taxation of a fast-food franchising relies on a correct interpretation of the Luxembourg-US Double Tax Treaty and therefore does not constitute illegal State aid (McDonald’s), 19 September 2018, e-Competitions Bulletin September 2018, Art. N° 88799

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