The European Commission “will investigate carefully the tax treatment of Nike in the Netherlands, to assess whether it is in line with EU State aid rules,” European Competition Commissioner Margrethe Vestager said in a statement.
The investigation will try to determine whether a series of tax agreements over almost a decade gave Nike an “unfair advantage over competitors” in the Netherlands, she added.
The investigation will focus on two Dutch-based units of Nike that the EU suspects paid tax “that may not reflect economic reality”, a statement said.
The units — Nike European Operations Netherlands BV and Converse Netherlands BV — in fact employ more than 1,000 workers and are involved in sales and marketing throughout Europe, the Middle East and Asia, the EU said.
As a result of five tax deals made with Dutch authorities, these companies largely skirted paying royalties in The Netherlands, significantly reducing Nike’s taxable income since 2006.
Revelations in 2017 against Nike were among the 13.4 million leaked documents known as the “Paradise Papers” which sparked an outcry about tax avoidance by multinationals and the world’s super rich.
The Netherlands has since tried to fight its reputation as a low tax hub for corporations, pledging in November to tighten rules on tax breaks for foreign firms after facing criticism from the EU for offering complicated schemes for multinationals.