June 20, 2018 / 9:39 AM / 9 months ago

France's Engie faces tax bill after EU ruling on Luxembourg

BRUSSELS (Reuters) - European Union regulators on Wednesday ordered Luxembourg to recover 120 million euros ($138.8 million) from French utility Engie, the latest move in an EU crackdown on tax deals which give some firms an unfair advantage.

FILE PHOTO: FILE PHOTO: The Engie logo is pictured on work helmets during a press visit at Engie windfarm in Radenac in Brittany, France, October 3, 2017. Picture taken October 3, 2017. REUTERS/Stephane Mahe/File Photo

This is the European Commission’s third ruling against Luxembourg’s tax deals with multinationals, and the sixth against European Union countries also including Ireland, Belgium and the Netherlands.

Reuters reported on June 14 that the EU antitrust enforcer would rule against the Engie tax arrangement, consisting of a complex financial structure that treated the same transaction both as debt, which can be deducted from a tax bill, and equity, which is not subject to tax.

European Competition Commissioner Margrethe Vestager said the arrangement artificially reduced Engie’s tax burden.

“As a result, Engie paid an effective corporate tax rate of 0.3 percent on certain profits in Luxembourg for about a decade. This selective tax treatment is illegal,” she said in a statement.

The Commission said the Luxembourg tax rulings enabled Engie to avoid paying any tax on 99 percent of the profits generated by two Luxembourg-based entities, Engie LNG Supply and Engie Treasury Management.

Engie declined to comment. Luxembourg said it had cooperated fully with the Commission, shared its objective of fighting harmful tax avoidance and had taken initiatives designed to prevent situations such as those mentioned by the Commission.

Luxembourg said Engie had been taxed in accordance with tax rules applicable at the relevant time, without selective treatment, which it said meant Engie had not received illegal state aid.

Critics say the Commission is over-reaching its power by using state aid rules against deals agreed according to international tax rules.

The EU tax avoidance clampdown has resulted in a record demand for Apple to pay back taxes of up to 13 billion euros to Ireland, Amazon 250 million euros to Luxembourg, Fiat 20-30 million euros to Luxembourg and Starbucks the same amount to the Netherlands.

Thirty-five multinationals including AB InBev and BASF have also been told to pay back a total of 700 million euros to Belgium.

Vestager’s decision comes ahead of a Thursday hearing at Europe’s second-highest court where Fiat and Luxembourg will challenge her findings. This kicks off a series of appeals by the targeted companies and countries in the coming months. The Starbucks hearing is scheduled for July 2.

Reporting by Foo Yun Chee, additional reporting by Richard Lough in Paris and Philip Blenkinsop in Brussels; editing by Robert-Jan Bartunek and Jan Harvey

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