McDonald’s Corp. is moving its non-US tax base from Luxembourg to the UK amid scrutiny from European Union regulators over its tax affairs.
The new holding company will pay U.K. corporation tax on royalties the firm receives outside the US.
The European Commission launched a formal investigation of Luxembourg’s tax deal with McDonald’s on Tuesday. Consumer groups and trade unions claim McDonald’s has avoided over 1 billion euros in taxes in Europe between 2009 and 2013.
But McDonald’s insists that it hasn’t broken any rules. From 2011 to 2015 the company said it “paid more than $2.5 billion in corporate taxes in the EU, with an average tax rate approaching 27 percent.”
Why the UK?
The reason why McDonald’s decided to move its non-US tax base to the UK is thought to be because of the “significant number of staff” it has in London, the country’s relatively low corporation tax rate and high number of skilled potential employees.
The company said in a statement: “McDonald’s selected the UK for the location of its new international holding structure because of significant number of staff based in London working on our international business, language, and connections to other markets.
“This change has a clear business rationale in matching our corporate structure to our new functional structure.”
Reasons for changing location to the UK were “sound before Brexit and remain so beyond it”, says McDonald’s
“The reasons for changing the location of the corporate structure to the U.K. were sound before Brexit and remain so beyond it,” the company said.
“These strengths are unlikely to change as the U.K. negotiates leaving the European Union.” The Big Mac maker cited the “significant number of staff based in London working on our international business, language, and connections to other markets.”
Prime Minister Theresa May’s official spokeswoman said: “We welcome continued investment from companies around the world into the UK, particularly where that’s securing growth and increasing jobs.”
The corporate tax rate in the UK is currently 20%. However, the government plans on cutting the rate down to 17% by 2020.