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Exclusive: Engie's Luxembourg tax deal set to be declared illegal aid - source

By Foo Yun Chee
The logo of French gas and power group Engie is seen on the company tower at La Defense business and financial district in Courbevoie, near Paris, France. May 16, 2018. REUTERS/Charles Platiau

By Foo Yun Chee

BRUSSELS (Reuters) - EU antitrust regulators will rule against French utility Engie's <ENGIE.PA> tax deals with Luxembourg in the coming weeks, a person familiar with the matter said, as the bloc continues its crackdown on corporate tax arrangements.

It will be the third ruling by the European Commission against Luxembourg's tax deals with multinationals and the fifth against European Union countries including Ireland, Belgium and the Netherlands, and could result in Engie paying millions of euros in back taxes.

The EU's competition enforcer declined to comment. The Luxembourg finance ministry, which has denied giving Engie any special treatment, said it would make a comment in due time. Engie said it had not been informed of any imminent EU decision.

The Commission in 2016 opened an investigation into rulings granted by Luxembourg to Engie since 2008, which the regulator said appeared to treat the same financial transaction between Engie subsidiaries as both debt and equity. The company has been present in Luxembourg since 1933.

This resulted in double non-taxation of companies in the GDF Suez group, as Engie was formerly known, a tax benefit that regulators said was not available to other companies.

The financial transactions were loans granted in 2009 and 2011 between four companies in the GDF Suez group that can be converted into equity and bear zero interest for the lender.

The Commission is using rules aimed at preventing EU countries from granting unfair state subsidies to certain companies, but which critics say over-reach regulatory powers against deals agreed according to international tax rules.

The EU tax avoidance clampdown has resulted in a record demand for Apple <AAPL.O> to pay back taxes of up to 13 billion euros (£11.35 billion) to Ireland, Amazon <AMZN.O> 250 million euros to Luxembourg, Fiat <FCHA.MI> 20-30 million euros to Luxembourg and Starbucks <SBUX.O> the same amount to the Dutch.

Thirty-five multinationals including AB Inbev <ABI.BR> and BASF <BASFn.DE have also been told to pay back a total of 700 million euros to Belgium.

Fiat and Luxembourg will challenge the Commission's finding at a hearing at Europe's second-highest court in Luxembourg on June 21, kicking off a series of appeals by the targeted companies and countries in the coming months. Starbucks' hearing is scheduled for July 2.


(Reporting by Foo Yun Chee, additional reporting by Geert De Clercq in Paris; Editing by Jason Neely and Mark Potter)