The Commission’s investigation focuses on the Netherland’s tax treatment of Inter Ikea, one of the two groups operating the Ikea business. It has concerns that two Dutch rulings from 2006-2011 may have allowed Inter Ikea to pay less tax in a so-called ‘sweetheart’ deal.

The EU will look at whether Ikea’s tax affairs breach EU rules on state aid which says that member states cannot give tax benefits to multinational groups that are not available to other companies.

Inter Ikea operates the franchise business of Ikea. All Ikea shops globally pay a franchise fee of 3% of their turnover to Inter Ikea Systems, a subsidiary of Inter Ikea, based in the Netherlands.

In 2006 a significant part of Inter Ikea Systems’ franchise profits were moved to I.I Holding, another company of the Inter Ikea group, based in Luxembourg where they remained untaxed.

This is due to I.I Holding being part of a special tax scheme which meant it was exempt from corporation tax.

In July 2006, the European Commission ruled that the Luxembourg tax scheme was illegal under EU state aid rules.

In 2011, Inter Ikea changed its structure so that the 2006 ruling no longer applied. Inter Ikea Systems then bought the intellectual property rights formerly held by I.I holding. To finance the acquisition, Inter ikea Systems received ab intercompany loan from its parent company in Liechtenstein.

The Dutch authorities then issued a second tax ruling in 2011, which endorsed the price paid by Inter IKEA Systems for the acquisition of the intellectual property. It also endorsed the interest to be paid under the intercompany loan to the parent company in Liechtenstein, and the deduction of these interest payments from Inter IKEA Systems' taxable profits in the Netherlands.

As a result of the interest payments, a significant part of Inter IKEA Systems' franchise profits after 2011 was shifted to its parent company in Liechtenstein.

The Commission will now investigate Inter IKEA Systems' tax treatment under both tax rulings. This move is the latest crackdown by the EU on tax deals between EU countries and multinationals. Previous investigations have included multinational giants such as Apple and Amazon.

Josefin Thorell, spokesperson for Inter Ikea said: 'Inter IKEA Group including its subsidiary Inter IKEA Systems B.V. is committed to paying taxes in accordance with laws and regulations wherever we operate. The way we have been taxed by national authorities, has in our view been in accordance with EU rules. It is good if the investigation can bring clarity and confirm that.

'A state aid investigation is a matter between the European Commission and concerned member states. We study the opening decision and we cooperate and respond to any questions the Dutch authorities or the European Commission might have.'

Report by Amy Austin