McDonald’s shifts tax base to UK amid EU scrutiny

McDonald’s has moved its non-US tax base to the UK, ditching Luxembourg where its tax arrangements are under attack from EU regulators and critics of corporate tax avoidance.

In an apparent vote of confidence in the UK, which decided in June to leave the EU, the fast food giant is creating a new international holding company based in the country.

The new company will be responsible for most of the royalties received from licensing McDonald’s intellectual property rights outside the US.

It will pay UK corporation tax, the company said.

It will make changes to its corporate structure starting next month.

“McDonald’s selected the UK for the location of its new international holding structure because” of the “significant number of staff based in London working on our international business, language, and connections to other markets”, it said.

The McDonald’s announcement comes as tax arrangements in Luxembourg receive tough scrutiny from EU antitrust officials. The company’s tax strategy has been targeted by trade unions and consumer groups who allege that it avoided more than €1bn in taxes in Europe between 2009 and 2013.

An EU official said earlier this year that the McDonald’s case shows “just how far some companies push tax authorities to avoid paying any taxes.”

“McDonald’s pays a significant amount of corporate taxes,” the company said. “From 2011-2015, we paid more than $2.5bn (€2.33bn) in corporate taxes in the EU, with an average tax rate approaching 27%.”

It generates about two-thirds of its revenue from outside the US.

Amazon.com tax deals with Luxembourg are also being probed by the EU, which in August ordered Apple to pay back as much as €13bn plus interest over tax arrangements with Ireland that regulators said were illegal.

The Government here has appealed the ruling over Apple taxes.

While Luxembourg has a corporate tax rate of as low as 20%, many multinational corporations received tax rulings that lowered effective taxes on profits transferred to the country.

Leaked documents from 2014 showed that more than 340 companies such as PepsiCo, Ikea, and FedEx transferred profits to the country through tax arrangements.

The commission said last year that one of McDonald’s units has paid no tax in Luxembourg since 2009 despite recording large profits.

The company’s French offices were inspected by the country’s fiscal authorities in 2013.