It is common knowledge that Ikea has been exploring complex tax mechanisms and constructs in order to transfer its profit in different European countries. After the unravelling of the LuxLeaks scandal in November 2014, the French paper “Le Monde” called Sweden’s well-known furniture manufacturer the “world champion of tax optimisation”.

A study published this Friday now reveals the magnitude of the tax practice. Appointed by the Greens in the European parliament, the American researcher Marc Auerbach discovered that Ikea has saved up to one billion euros of taxes in the EU between 2009 and 2014. “Ikea is an example of a company that used a particularly aggressive strategy for its tax avoidance scheme”, the researcher told the Luxemburger Wort in an interview. His report also shows how a company is able to use loopholes within the EU in order to pay as little tax as possible.

A holding in Belair

Ikea’s company structure is far from being transparent and even this newest report has not been able to pinpoint every single detail. Even the European Parliament still has trouble in getting it all straight. When MPs of the special “Tax” committee questioned the CEOs of some of the world’s biggest companies, Ikea’s chief financial officer revealed that there is actually a second company called Inter Ikea.

The mother company of this “second” Ikea has its headquarters in a small street in Belair. This Luxembourg Holding was created in 1992 and is the key to the tax avoidance scheme put in place by Ikea’s founder Ingvar Kamprad.

And this is how it works: Every single Ikea store in the world – there are 328 in total – has to pay three percent on every “Billy” shelf sold or “Köttbullar” meatball. You wonder why? Inter Ikea owns the brand and the concept behind the various stores.

This is why the licence fees (royalties) of every store are to be paid to the Dutch subsidiary of the Luxembourg Holding Inter Ikea Systems. The amount of three percent may seem small at first but has totalled 13,6 billion euros between 1991 and 2014.

Today these licence fees amount to a total of one billion euros each year. This monetary flow represented near to one fourth of the company’s net income between 2009 and 2014.

Contacted by the Luxemburger Wort an Ikea spokesperson said: “We have not yet seen the report and can therefore not comment on details. But from what we have understood, based on the questions from the media, there seems to be some misunderstandings leading to incorrect conclusions.”

Reporting by Laurent Schmit and Diego Velazquez.