The European Commission has deepened its inquiry into Luxembourg’s tax treatment of Engie, the French utility company, which allegedly broke EU law.
As reported by The Financial Times, Brussels’ preliminary findings suggest that internal transactions enabling the company to cut its tax bill were a form of illegal state aid. The company faces the prospect of having to pay about €300m in back taxes to Luxembourg if the findings are upheld.
The commission on January 5 released the preliminary report from its investigation into Engie, formerly known as GDF Suez, saying it “has not been able to identify any possible ground for justifying the preferential treatment” that the company received.
In a 50-page document setting out her grounds for an in-depth investigation into Engie, Margrethe Vestager, EU competition commissioner, said the arrangements led to an “unjustified reduction of their taxable base”, which was selective in nature since it was not available to all other corporate taxpayers.
“At this stage, the commission has no indication that the treatment afforded to the GDF Suez Group companies and the GDF Suez Group as a whole as a result of the contested tax rulings could be considered compatible with the internal market,” the preliminary ruling said.
Engie said: “Engie will provide its comments to the European Commission and the Luxembourg state in the coming months and will not make any further public statement.”
According to The Wall Street Journal, the commission is looking at two zero-interest loans that could be converted into equity that were granted by two Engie units to two others in 2009 and 2011. In those transactions, the deducted interest payments are converted to company shares, allowing both sides to dodge taxation on the profit.