EU opens probe into tax
deals between Luxembourg and Engie
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[September 19, 2016]
By Julia Fioretti
BRUSSELS (Reuters) - European Union
antitrust regulators opened a probe on Monday into tax deals granted
by Luxembourg to French power utility Engie, stepping up the EU's
campaign against tax avoidance by multinationals.
The European Commission said it had concerns the tax rulings granted
by Luxembourg since 2008 appeared to treat the same financial
transaction as both debt and equity, leading to double non-taxation
of companies in the GDF Suez group, as Engie was formerly known.
That may have given GDF Suez an unfair advantage over other
companies in breach of EU state aid rules, the Commission said.
"Financial transactions can be taxed differently depending on the
type of transaction, equity or debt - but a single company cannot
have the best of two worlds for one and the same transaction,"
Margrethe Vestager, EU Competition Commissioner, said in a
A spokeswoman for Engie said the company took note of the decision
and would cooperate fully with the Commission to answer its
Engie has been present in Luxembourg since 1933 and currently
employs about 300 people, she said.
Only last month Vestager made headlines by ordering Apple to pay
Ireland up to 13 billion euros ($14.5 billion) in unpaid taxes,
angering both Washington and Dublin.
Vestager will meet with U.S. Treasury Secretary Jack Lew in a trip
to the United States this week, where she has been criticized for
allegedly targeted U.S. companies, something the EU denies.
A Commission spokesman said it was a coincidence the investigation
into Engie, a French company, was opened the same week.
The financial transactions are loans granted in 2009 and 2011
between four companies in the GDF Suez group that can be converted
into equity and bear zero interest for the lender.
"The final result seems to be that a significant proportion of the
profits recorded by GDF Suez in Luxembourg through the two
arrangements are not taxed at all," the Commission said.
[to top of second column]
Isabelle Kocher, new Chief Exective Officer of French gas and power
group Engie, attends the group shareholders general meeting in
Paris, France, May 3, 2016. REUTERS/Benoit Tessier
The borrower companies - GDF Suez Treasury Management and GDF Suez LNG Supply -
were able to significantly reduce their taxable profits in Luxembourg by
deducting the provisioned interest payments, which are tax deductible expenses,
The lender companies - LNG Luxembourg and Electrabel Invest Luxembourg - avoided
paying any tax on the profits from the transaction because Luxembourg tax rules
exempt income from equity investments from taxation, the Commission said.
A Commission spokesman said it was too early to say how much tax Engie may have
to pay if it is found to have breached state aid rules.
The EU has already launched investigations into tax deals granted by Luxembourg
to other multinationals such as McDonald's and Amazon.
In December last year the Commission ordered carmaker Fiat to pay back up to 30
million euros to Luxembourg.
(Additional reporting by Benjamin Mallet in Paris; Editing by Alissa de
Carbonnel and Mark Potter)
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