By Natalia Drozdiak 

BRUSSELS-- Engie SA, the French energy company, may have to return at least EUR300 million ($316.0 million) in unpaid taxes to Luxembourg if its tax arrangements are found to breach the European Union's rules on illegal state aid, according to new details released Thursday.

The figure can be calculated from a nonconfidential version of the European Commission's decision to investigate the government's tax treatment of the French energy company.

The EU's competition watchdog in September opened its investigation into Luxembourg's tax arrangements with Engie, formerly known as GDF Suez, saying several tax rulings the government granted appeared to allow the company to reduce its tax bills on profits arising in the country.

The tax rulings, or so-called comfort letters sent by governments to multinational corporations to give clarity on how a specific tax will be calculated, may have constituted a tax advantage for Engie not available to other companies, the EU says.

On Thursday, the commission published the nonconfidential version of that statement after redacting sensitive business information from the final text.

In its probe, 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.

The regulator argues the arrangements represent a misapplication of Luxembourg's tax laws since most of the profit generated in the country went untaxed anywhere, which isn't allowed under the country's rules.

The EU's statement shows the rulings granted by Luxembourg may have allowed Engie to reduce its taxable base by around EUR1.1 billion. That sum would have generated around EUR300 million for the country's tax authorities had Luxembourg taxed the profit at the official corporate rate of around 29%.

The EU says it is still investigating the arrangements and that final figures could change based on additional information the regulator receives. It says there is no set timeline to conclude the investigation.

An Engie spokeswoman said the company will provide comments to the European Commission and the government of Luxembourg, but won't make any public statement on the case.

Luxembourg on Thursday said the allegations were unsubstantiated. The government would "be able to convince the commission in due time that no particular tax treatment or selective advantage has been granted to companies of the Engie group in Luxembourg."

The European Commission opened the Engie case several weeks after ordering Ireland to retrieve EUR13 billion in unpaid taxes from Apple Inc., aggravating a feud between the EU and the U.S. over the bloc's tax probes into American companies.

The EU competition watchdog has dismissed the allegations of bias, pointing to cases against European companies such as Engie and Fiat Chrysler Automobiles NV. In October 2015, the commission ordered Luxembourg to recoup between EUR20 million and EUR30 million in unpaid taxes from Fiat's financing arm.

Luxembourg in late December tightened its tax rules for the Luxembourg-based funding arms of multinational companies, which includes one of the Engie companies used in the arrangements being investigated. Starting Jan. 1 of this year, the country's previous tax rulings are no longer binding on the government's tax authorities, which means many of the agreements may have to be renegotiated.

Ireland in 2014 also closed tax loopholes under EU pressure, but that didn't prevent the commission from deciding to order Dublin to reclaim money from Apple last August.

Write to Natalia Drozdiak at natalia.drozdiak@wsj.com

 

(END) Dow Jones Newswires

January 05, 2017 09:48 ET (14:48 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.