luxembourg, luxembourg city, landscape.jpg
Photograph: / waldomiguez

The European Union launched a probe Monday into tax benefits granted in Luxembourg to GDF Suez, suspecting that the French energy giant may have benefited from an illegal competitive advantage.

It is the fourth case opened by the bloc's executive, the European Commission, into tax-dodging by large corporations in the small European country.

"We will look carefully at tax rulings issued by Luxembourg to GDF Suez. They seem to contradict national taxation rules and allow GDF Suez to pay less tax than other companies," EU Competition Commissioner Margrethe Vestager said in a statement.

GDF Suez has since been renamed Engie.

The Luxembourg Finance Ministry swiftly rejected the claim.

"Luxembourg considers that no special tax treatment or selective advantage has been awarded to any Engie group company in Luxembourg," it said in a statement, while also pledging to "submit to the commission all information required."

Tax rulings are issued by many countries to provide companies with clarity on how their taxes will be calculated. But there are suspicions that some European countries inappropriately used tax rulings to attract large multinationals.

In the case of GDF Suez, the commission found that financial transactions between its Luxembourg subsidiaries were treated as both debt and equity, in effect allowing "a significant proportion" of its profits not to be taxed.

"Financial transactions can be taxed differently depending on the type of transaction, ... but a single company cannot have the best of two worlds for one and the same transaction," Vestager said.

If the scheme is found to have violated the EU's strict competition laws, the commission could order Luxembourg to recoup the tax advantages from the French company.

Taxation is usually a national issue in the 28-country EU, but the commission has started intervening because it believes the tax arrangements constitute state aid, an area it regulates.

The Brussels institution has asked for information on more than 1,000 tax rulings from 23 EU countries, commission spokesman Ricardo Cardoso said Monday.

Last year, it ordered Luxembourg to recoup millions of euros in illegal tax advantages from the financing arm of Italian carmarker Fiat - a decision that Luxembourg has said it will appeal in court.

The commission is also investigating tax benefits granted in Luxembourg to US online retailer Amazon and fast food giant McDonald's.

Some critics have accused the EU of cracking down on US companies to protect its own industry, but the commission on Monday once again rejected that suggestion.

"We have taken decisions involving both US-based companies and also Europe-based companies," Cardoso told journalists in Brussels. "We will always apply state aid rules to all companies, and this independently of whether they are EU-based or US-based companies - or based anywhere else for that matter."

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