The European Commission today announced the opening of an in-depth investigation into Luxembourg's tax treatment of a French electric utility.
The EC release states that there are concerns that several tax rulings issued by Luxembourg may have given the taxpayer “an unfair advantage” over other companies, in breach of EU state aid rules.
The EC will assess whether Luxembourg tax authorities selectively derogated from provisions of national tax law in tax rulings issued to the French electric utility—that is, whether the tax rulings treat the same financial transaction relating to two zero-interest convertible loans in an inconsistent way, both as debt and as equity. The EC found that the treatment endorsed in the tax rulings resulted in tax benefits in the taxpayer’s favor, and this treatment is not available to other companies subject to the same national taxation rules in Luxembourg.
At this stage, the EC has determined the following about tax rulings concerning two financial transactions:
The final result, according to the EC release, is that a significant proportion of the profits through the two arrangements are not taxed at all.
Other EC state aid investigations concern:
Read a September 2016 report prepared by KPMG’s EU Tax Centre
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