EU Tax Push May Land France's Engie With $300 Million Luxembourg Levy
January 05 2017 - 10:03AM
Dow Jones News
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)
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