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This Is How IKEA's Tax Scheme Works

An Ikea store in California
An Ikea store in California

LEIDEN — Over the years, several journalists have dug into the corporate structure of Swedish furniture giant IKEA and the business dealings of founder and CEO Ingmar Kamprad. But the probes have turned up little dirt.

But now, the European Parliament's Green Party group say they have managed to map out IKEA's complex revenue scheme they believe has allowed the company to dodge some one billion euros in taxes, reports Swedish daily Dagens Nyheter.

It was at European Parliament hearing in November 2015 that the Norwegian-born former French magistrate and Green party leader Eva Joly became interested in IKEA.

When IKEA's director of corporate finance, Krister Mattsson, told the hearing that the multinational was often confused with the company Inter IKEA, Joly and other EU Green Party officials were curious to know more. Now in a report released over the weekend, Joly's party says it can trace how the Swedish company moves money around different parts of the IKEA Group between different countries to minimize its tax burden. This is how they say it works:


• IKEA stores pay 3% of their profit in royalties to Inter IKEA in the low-tax Netherlands (IKEA is the furniture company, while Inter IKEA owns the trademark and the concept of the brand). By doing this, the taxable profit in eight of IKEA's European subsidiaries is reduced by 35 to 64%.

• Inter IKEA then transfers the money in two directions: one amount goes to an unknown recipient — who may be the former secret Interogo Foundation in Liechtenstein — and a second amount as interest to Interogo Finance in Luxembourg. The interest is due to an internal loan from when Inter IKEA bought the IKEA brand from Interogo Finance for 86 billion Swedish kronor in 2012 (circa 9 billion euros) and borrowed more than half of the money from Interogo.

• This money is not taxed because the Netherlands does not tax royalties and interest money that is sent abroad.

• Interogo Luxembourg then pays the revenue to Interogo Foundation in Liechtenstein. Thanks to a tax treaty with Luxembourg, and because the money is sent out of the country to Liechtenstein, Interogo Finance paid only 0.06% in taxes between 2012 and 2014.

• The Interogo Foundation in Liechtenstein does not need to pay taxes on the revenues it receives because the country does not impose tax on money sent from abroad.

The Green party has now asked the European Commission to review the report and determine whether IKEA has breached any EU law.

In a statement released to Swedish paper Dagens Industri, IKEA said they cannot comment because they have not been shown the report. The company also emphasized that it conducts its business in a responsible manner, stating that "IKEA Group pays taxes in accordance with the laws and regulations wherever we operate through retail, manufacturing, or in any other way."

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