"Member States cannot allow some companies to pay fewer taxes by artificially relocating profits elsewhere can".
The EU's competition chief has also asked Apple to provide details of its latest tax structure as regulators try to recover €13bn (£11.5bn) in back taxes to Ireland.
The investigation relates to rulings given by the Dutch tax authorities to IKEA Systems (Systems), a Dutch subsidiary of Inter IKEA group. In return, the IKEA shops are entitled to use inter alia the IKEA trademark, and receive know-how to operate and exploit the IKEA franchise concept.
The Commission's Ikea inquiry is focused on two tax agreements between the Netherlands and Inter Ikea which it alleges "have significantly reduced" the firm's taxable profits in the Netherlands.
It will probe a 2006 deal on how Ikea calculates a license fee paid by a Dutch unit to a Luxembourg branch where it was exempted from tax.
Then during 2011, after the tax scheme in Luxembourg was branded illegal, Inter Ikea was able to arrange another tax ruling with the Dutch. The investigation will focus on the relationship between the Luxembourg-based Inter Ikea Holding, owned by the Netherlands-based Inter Ikea Systems, which collects royalties from other parts of Ikea yet pays little tax on the proceeds.
A probe into Ikea, one of Europe's best-known brands, may ease criticism Vestager has received for focusing on how USA companies reduce taxes. "We will now carefully investigate the Netherlands' tax treatment of Inter IKEA", European Commission commissioner Margrethe Vestager said.
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"The Netherlands will, of course, cooperate with the investigation in order to establish whether it involves state aid", the Dutch government said in a statement.
Ireland began receiving almost $15.33 billion in back taxes this month from Apple after a commission investigation determined that Apple used a loophole in Irish tax law to store much of its non-U.S. profits in the country.
I.I. Holding paid no corporate tax in Luxembourg because of Luxembourg tax rules in place at the time.
The commission "has concerns" that the Dutch rulings have given Ikea an unfair advantage against other companies, which is against European Union competition rules.
"As a result of the interest payments, a significant part of Inter IKEA Systems' franchise profits after 2011 was shifted to its parent in Liechtenstein".
The Commission will also assess whether the price Inter IKEA Systems agreed for the acquisition of the intellectual property rights and consequently the interest paid for the intercompany loan, endorsed in the 2011 tax ruling, reflect economic reality.
The Commission said that it considers at this stage that the treatment endorsed in the two tax rulings may have resulted in tax benefits in favor of Inter IKEA Systems, which are not available to other companies subject to the same national taxation rules in the Netherlands. The report stated that IKEA is said to have built up a network of subsidiaries in the Netherlands, Luxembourg and Liechtenstein.
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