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McDonald's International heads to UK after heightened EU scrutiny

December 9, 2016

McDonald's is moving its international tax base from European Union member Luxembourg to the EU-rejecting United Kingdom.

The move comes after increased EU regulatory scrutiny due to tax agreements with Luxembourg. 

The QSR brand's leadership said the UK-based international holding company is being created to handle royalties from its non-US licensing pacts, according to a Reuters report. 

"We are aligning our corporate structure with the way we do business, which is no longer in geographies, but in segments that group together countries with common market and growth characteristics," said the company's statement to Reuters, which noted the move would save McDonald's money.  

The EU was investigating McDonald's regarding potential for sweetheart tax deals by locating in the small EU-member state of Luxembourg. Smaller EU states often offer multinational companies these incentives to attract their investments and job creation potential. 

In recent months, the EU has levied fines on big U.S.-based companies including Apple, which was ordered to pay Ireland $13.8 billion in unpaid taxes.

McDonald's joins other U.S. companies, like Allegion and Aon, making the move to the U.K. following that country's vote to leave the EU, given the U.K.'s more lenient taxation rules on foreign subsidiaries. The U.K. mandates profits earned by overseas companies registered there are largely exempt from taxing by the U.K., even if the company's income is not taxed.