EU court adviser backs Engie's fight against EU tax order

By Foo Yun Chee

BRUSSELS (Reuters) - Engie should not pay 120 million euros ($133 million) in Luxembourg back taxes as ordered by EU competition authorities, an adviser to Europe's top court said, in a potential setback for EU competition chief Margrethe Vestager's crusade against sweetheart tax deals.

The European Commission in its 2018 decision said the French utility's tax deal that treated the same transaction both as debt, which can be deducted from a tax bill, and equity, which is not subject to tax, artificially reduced its tax burden.

As a result, Engie paid as little as 0.3% tax on certain profits in Luxembourg for a decade.

The Luxembourg-based General Court, Europe's second-highest, backed the EU executive in 2021, prompting Engie and Luxembourg to appeal to the Court of Justice of the European Union (CJEU).

"The Commission erred in finding that Luxembourg had granted unlawful State aid to the Engie group in the form of tax advantages," Advocate General at the Court of Justice of the European Union (CJEU) Juliane Kokott said on Thursday.

"First, national law alone constitutes the reference framework and, second, only manifestly incorrect tax rulings under that national law may constitute a selective advantage," she said.

Judges, who in most cases follow advisers' non-binding recommendations, will rule in the coming months.

The cases are C-451/21 P Luxembourg v Commission and C-454/21 P Engie Global LNG Holding and others v Commission.

($1 = 0.9047 euros)

(Reporting by Foo Yun Chee and Bart Meijer in Amsterdam; Editing by Simon Cameron-Moore)