Latest filings by British arm of McDonald’s reveals level of royalty payments to Luxembourg entity
The British operations of burger giant McDonald's paid £123m for franchise rights last year which are part of a structure that is being investigated by European authorities.
The company, whose UK operations are captured in a Luxembourg based company, McD Europe Franchising, reported a profit of $541m for the year to December 2015, almost identical to the $540m it reported in the year before.
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Last December, the European Commission launched a formal investigation into Luxembourg's tax treatment of McDonald's.
A spokesperson for McDonald's said that the level of royalties paid were "given careful consideration [and] is based on arm's length principles".
We have a constructive relationship with HMRC and are in discussion with them on this matter. The royalty payments made by McDonald’s UK have increased in line with the UK’s system-wide sales growth between 2014 and 2015 (including both owned and franchised restaurants).
McDonald’s complies with all applicable tax laws including the timely and accurate payment of taxes that are owed in the UK .
European authorities have scrutinised the corporate royalty arrangements from a range of companies including Google, Starbucks and Amazon.
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Commissioner Margrethe Vestager, in charge of competition policy, has previously said: "A tax ruling that agrees to McDonald's paying no tax on their European royalties either in Luxembourg or in the US has to be looked at very carefully under EU state aid rules. The purpose of double taxation treaties between countries is to avoid double taxation – not to justify double non-taxation."
The spokesperson for McDonald's added: "We pay substantial amounts of corporation tax in the UK, in fact in the last five years, McDonald’s UK has paid over £250m in corporation tax alone.
"Through business rates, employer national insurance and corporation tax the total contribution over the last five years by McDonald’s UK to the UK economy is in excess of £430m.”