Brussels has ordered Amazon to pay €250m (£221.5m) in back taxes to Luxembourg in its latest crackdown on US tech giants.
The European Commission had already said a deal between Amazon and Luxembourg over how much tax it pays amounted to state aid in preliminary ruling in 2015.
Now the competition chief Margrethe Vestager has ordered the tech company to repay millions. "Luxembourg gave illegal tax benefits to Amazon," she said.
"As a result, almost three quarters of Amazon's profits were not taxed. In other words, Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules. This is illegal under EU State aid rules. Member States cannot give selective tax benefits to multinational groups that are not available to others."
Amazon has responded, saying it did not recieve any special treatment from Luxembourg and it "paid tax in full accordance with both Luxembourg and international tax law".
"We will study the Commission's ruling and consider our legal options, including an appeal. Our 50,000 employees across Europe remain heads-down focused on serving our customers and the hundreds of thousands of small businesses who work with us," said a spokesperson for the company.
Luxembourg's finance ministry said it "will use appropriate due diligence to analyse the decision and reserves all its rights".
"The decision of the Commission refers to a period going back to 2006. Over time, both the international and the Luxembourg legal frameworks have substantially evolved. As Amazon has been taxed in accordance with the tax rules applicable at the relevant time, Luxembourg considers that the company has not been granted incompatible State aid, as foreseen by article 107(1) of the Treaty on the Functioning of the European Union."
It added that it is fully cooperating with the commission and committed to tax transparency and "the fight against harmful tax avoidance".
It's the latest ruling from Brussels when it comes to the tax arrangements of tech companies. Last year it ordered Ireland to recoup a record €13bn from Apple as a so-called sweetheart deal was deemed to amount to state aid.
Both Apple and Ireland have challenged the ruling, but a legal tussle between the two has resulted in furhter action by the commission with the cash yet to be collected more than a year later. Vestager also said today that the case has been referred to the European Court of Justice.
EU member states last month signalled their intention for coordinated action on the taxes paid by tech companies. Led by French finance minister Bruno Le Maire, the plans are supported by eight other states, including Germany and Spain. The proposals are to tax the firms on turnover rather than profit.
The latest action is likely to inflame tensions between Europe and the US. Business groups and politicians across the pond have warned that such actions are detrimental to economic growth.