The European Commission on September 6 released the nonconfidential version of its decision concluding that a Luxembourg tax ruling granted to subsidiaries of multinational French energy firm, Engie, is State aid. As a result of the decision, announced June 20, Luxembourg must recover about 120 million euros in unpaid tax from the Engie group, plus interest.
The tax ruling involved a hybrid zero interest rate convertible loan between group members. The Luxembourg government, in tax rulings issued in 2008 and 2010, sanctioned Engie’s treatment of the instrument as debt by some group members and as equity by others.
The Commission said that the tax rulings enabled two Engie group companies to claim significant interest deductions against their income and thus avoid paying taxes on almost all their profits in Luxembourg while the other group companies did not report corresponding income from the same transaction.
The Luxembourg government last week announced that it will appeal the Commission’s decision to the European Court of Justice.
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