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On 20 June 2018 the European Commission (“EC”) issued a press release concerning its final decision in the State aid investigation into tax rulings granted by the Luxembourg tax authorities to GDF Suez group (now Engie) (“the Group”) in relation to the treatment of certain financing transactions. The EC considered that the Group received an undue advantage and requested recovery of up to EUR 120 million of tax.

The formal investigation concerned the treatment of certain interest-free convertible loans (“instruments”) issued by two Luxembourg group subsidiaries (“borrowers”) to two other Luxembourg companies of the Group (“lenders”).

The decision is the latest in a number of high profile cases concerning EC’s approach to State aid and taxation. While a number of the recent cases concern transfer pricing matters, the decision in GDF Suez’s case appears to focus on the fact that the arrangement gives rise to a deduction of an expense without a corresponding income inclusion.

The EC’s concerns perhaps have some echoes of the BEPS Actions and the matters which have been further addressed through the European Union Anti Tax Avoidance Directives (“ATAD I” and “ATAD II”). 

However, the text of the final decision will be important for the understanding of the EC’s detailed argumentation and position in the case.