ENGIE’s Tax Planning in Luxembourg

On September 16, 2016, the European Commission announced an investigation into French energy giant ENGIE (formerly GDF SUEZ) for allegedly avoiding €120 million (approximately 850 million RMB) in taxes through Luxembourg. According to ENGIE’s official website, the company operates in three core areas: 1) low-carbon power generation, 2) global natural gas and energy networks, and 3) customer solutions. The European Commission initiated the investigation on suspicions that Luxembourg’s tax authorities had granted ENGIE illegal tax rulings in 2008 and 2011. These rulings allegedly provided ENGIE with significant tax benefits, potentially violating the EU’s State Aid Rules.

On June 20, 2018, the European Commission published its findings, concluding that ENGIE had indeed obtained illegal tax benefits through Luxembourg's tax rulings. It ordered Luxembourg to recover €120 million in unpaid taxes from the energy company. The Commission argued that the tax rulings selectively granted favorable treatment to ENGIE, allowing it to avoid tax on 99% of its profits, effectively reducing its tax rate to just 0.3%. This, the Commission stated, was unfair to ENGIE’s competitors.

Both Luxembourg and ENGIE appealed the EU’s decision to the European General Court. On May 12, 2021, the court ruled against the appellants, upholding the decision that Luxembourg must recover the unpaid taxes from ENGIE. Whether Luxembourg and ENGIE pursued further appeals remains uncertain, but the EU achieved an initial victory in this case.

In this article, we’ll explore how ENGIE leveraged tax planning in Luxembourg and analyze why the EU and the court deemed the arrangement illegal.