The Commission will assess in particular whether Luxembourg tax authorities selectively derogated from provisions of national tax law in tax rulings issued to GDF Suez. They appear to treat the same financial transaction between companies of GDF Suez in an inconsistent way, both as debt and as equity.

Margrethe Vestager, commissioner in charge of competition policy, said: “Financial transactions can be taxed differently depending on the type of transaction, equity or debt – but a single company cannot have the best of two worlds for one and the same transaction. Therefore, 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.”

As from September 2008, Luxembourg issued several tax rulings concerning the tax treatment of two similar financial transactions between four companies of the GDF Suez group, all based in Luxembourg. These financial transactions are loans that can be converted into equity and bear zero interest for the lender. One convertible loan was granted in 2009 by LNG Luxembourg (lender) to GDF Suez LNG Supply (borrower); the other in 2011 by Electrabel Invest Luxembourg (lender) to GDF Suez Treasury Management (borrower).

The tax treatment appears to give rise to double non-taxation for both lenders and borrowers on profits arising in Luxembourg. The final result seems to be that a significant proportion of the profits recorded by GDF Suez in Luxembourg through the two arrangements are not taxed at all.

The Commission’s preliminary assessment is that GDF Suez is able to avoid paying taxes on such transactions as a result of the tax rulings. It appears to be obtaining a considerable economic advantage not available to other companies subject to the same national tax rules. If confirmed, this would amount to illegal state aid.

The investigation concerns Engie subsidiaries in Luxembourg: GDF Suez Treasury Management, which receives interest payments from other European group companies; GDF Suez LNG Supply, which trades LNG; and LNG Luxembourg and Electrabel Invest Luxembourg, which act as intermediaries for intra-group financing transactions.

The non-confidential version of the decision to open the investigation will be made available under the case number SA.44888 in the State Aid Register on the competition website.