AMSTERDAM: Starbucks Corp. is going through the grinder in Europe.
The world’s biggest coffee chain has raised suspicions among regulators and local governments by reporting losses in its biggest European markets for years despite recording hundreds of millions of dollars in annual sales.
Last year, as European Union regulators opened a formal investigation, a profit materialized: €407 million ($446.6 million), reported by the company’s European head office in Amsterdam. The coffee chain has since moved its headquarters to London.
The reason for the windfall: 502 million Swiss francs ($527.8 million) in dividends, transferred from the company’s coffee-buying unit in Switzerland, which has fewer than 40 employees, according to corporate filings.
The huge profit is likely to stoke concerns around Starbucks’s tax practices in Europe, which are under scrutiny for the second time in just over two years. EU antitrust chief Margrethe Vestager, who is running the bloc’s investigation of Starbucks’s tax affairs, has pledged to announce results by June, which could include sizable back-tax demands.
Starbucks has long insisted that its complex European structure—which until recently centered in the Netherlands rather than the U.K., by far its biggest market in the region wasn’t designed to avoid tax. The structure, it said, was built around its Amsterdam-based coffee-roasting house and reflected that city’s rich history with coffee.
