The Luxembourg ruling in 2003 allowed Amazon to reduce its tax bill in the country over eight years, and saw it pay just a quarter of the rate local companies faced.

‘Luxembourg gave illegal tax benefits to Amazon. As a result, almost three-quarters of Amazon's profits were not taxed,’ European Competition Commissioner Margrethe Vestager said.

European Commission president Jean-Claude Juncker was president of Luxembourg at the time.

The Luxembourg ruling allowed Amazon’s operating company in the Grand Duchy to transfer approximately three quarters of the profits of its operating company, Amazon EU, to its holding company, Amazon Europe Holding Technologies, which had no employees, offices or business activity. It would then channel a portion back to the US in royalty payments for use of intellectual property.

The arrangement ‘significantly reduced’ Amazon’s tax liabilities, the Commission found.

‘Member states cannot give selective tax benefits to multinational groups that are not available to others,’ Vegstager said.

A spokesperson for Amazon said: ‘We believe that Amazon did not receive any special treatment from Luxembourg and that we 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.’

Report by Calum Fuller