Engie Scores Legal Victory: French utility Engie has successfully challenged the European Union’s directive to pay €120 million ($130 million) in back taxes to Luxembourg. This decision deals a blow to the European Commission’s efforts to combat preferential tax agreements between EU nations and multinational corporations. In 2018, the Commission, acting as the EU’s competition watchdog, accused Engie of a tax arrangement with Luxembourg that artificially reduced its tax liability by treating the same transaction as both debt and equity. This, according to the Commission, resulted in Engie paying as little as 0.3% tax on certain profits in Luxembourg for a decade.
However, the Court of Justice of the European Union (CJEU) disagreed with the lower tribunal’s decision to uphold the Commission’s ruling. The CJEU stated that the Commission’s review of Luxembourg’s tax rulings for Engie violated EU law, citing various errors in the analysis. The court concluded that these errors undermined the entire selectivity analysis, leading to the annulment of the Commission’s decision.
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This legal victory for Engie is part of a larger trend where multinational corporations challenge the EU’s efforts to scrutinize tax schemes involving member states and corporations. Other companies, including Stellantis, Amazon, and Starbucks, have also succeeded in legal challenges against the EU’s tax orders. The outcome of these cases has implications for ongoing and future investigations, such as those involving IKEA, Nike, and Huhtamaki.
The decision highlights the complex and contentious nature of tax arrangements between corporations and EU member states, as authorities seek to address concerns about tax avoidance and ensure fair taxation practices across the union.