Following the announcement on Wednesday 20 June 2018 by the European Commission that ENGIE benefitted from illegal tax benefits in Luxembourg and ordered them to pay €120 million to the Luxembourg tax authorities, Luxembourg reacted and issued a statement from the Ministry of Finance.
Commissioner Margrethe Vestager, in charge of competition policy, said "Luxembourg gave illegal tax benefits to Engie. Its tax rulings have endorsed two complex financing structures put in place by Engie that treat the same transaction in an inconsistent way, both as debt and as equity. This artificially reduced the company's tax burden. As a result, Engie paid an effective corporate tax rate of 0.3% on certain profits in Luxembourg for about a decade. This selective tax treatment is illegal."
Following an in-depth investigation launched in September 2016, the Commission concluded that two sets of tax rulings issued by Luxembourg have artificially lowered Engie's tax burden in Luxembourg for about a decade, without any valid justification.
"The Commission points out circumstances leading to an erosion of the tax base or even non-taxation. Luxembourg agrees that such results, albeit in accordance with the letter of the law, no longer correspond to the current spirit of the national and international tax framework.
Luxembourg stresses that it has cooperated fully with the Commission throughout its investigation and shares the Commission's objective of fighting harmful tax avoidance. Luxembourg is fully committed to the OECD BEPS project and has actively supported the adoption of the European Union’s ATAD directives, in the spirit of the level playing field. On 15 June 2018, the government adopted a draft law implementing the ATAD directive into Luxembourg law and amending provisions of the tax code, with the aim of preventing situations such as those mentioned by the Commission.
The Commission has acknowledged the recent initiatives taken by Luxembourg in this area.
Nevertheless, as ENGIE has been taxed in accordance with the tax rules applicable at the relevant time, without having received a selective treatment, Luxembourg considers that ENGIE has not been granted State aid incompatible with the internal market, within the meaning of article 107(1) of the Treaty on the Functioning of the European Union.
Luxembourg will use appropriate due diligence to analyse the decision and reserves all its rights."
