EU Commission Publishes New State Aid Investigation

On January 5, the EU Commission published the non-confidential version of the decision to open an in-depth investigation into Luxembourg's tax treatment of GDF Suez (now Engie) that is believed to be in breach of EU state aid rules.

Opening an In-Depth Investigation

The non-confidential version of the decision was adopted on 19 September 2016 to open an in-depth investigation into Luxembourg's tax treatment of the GDF Suez group (now Engie). The GDF Suez Group, operates in independent power production, liquefied natural gas, renewable energy and energy efficiency services.

The Commission suspects that several tax rulings issued by Luxembourg may have given GDF Suez an unfair advantage, which are not available to other companies subject to the same national taxation rules in Luxembourg, in breach of EU state aid rules.

Two Financial Transactions Treated as Debt and Equity

The Commission considers at this stage that in the tax rulings the two financial transactions are treated both as debt and as equity. This is an inconsistent tax treatment of the same transaction. On the one hand, the borrowers can make provisions for interest payments to the lenders (transactions treated as loan). On the other hand, the lenders' income is considered to be equity remuneration similar to a dividend from the borrowers (transactions treated as equity).

The Commission provides more information in its decision to open an in-depth investigation, excluding sensitive information covered by professional secrecy.

Sources: EC - Decision, EC September Decision Press Release, Financial Times
 

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