Brussels, 22/07/2015 (Agence Europe) - The European Commission has concluded that the French electricity company EDF was granted an undue tax break and must pay back to the French state a total amount which has been put at €1.37 billion (€889 million in tax exemptions in 1997 and €488 million in interest).
France did not levy all the corporation tax payable by EDF in 1997 when certain accounting provisions were reclassified as capital. Taking the view that this tax exemption gave the public company an undue economic advantage over other operators on the market, the Commission has ordered EDF to pay back this aid in order to remedy the competition distortion.
“Whether private or public, large or small, any undertaking operating in the single market must pay its fair share of corporation tax. The Commission's investigation confirmed that EDF received an individual, unjustified tax exemption which gave it an advantage to the detriment of its competitors”, the Commissioner for Competition, Margrethe Vestager, commented on Wednesday 22 July.
Between 1987 and 1996, EDF made accounting provisions with a view to renewing the high-voltage transmission network in France, which the company stated that it had been awarded as a concession. In 1997, when EDF's balance sheet was restructured, the French authorities reclassified some of these provisions as a capital injection, without levying corporation tax.
In 2013, the Commission reopened investigation dating back to 2003 following a judgment of the Court of June 2012 stating that it was necessary to verify whether a private investor would have made an investment for a similar amount under similar circumstances (case C-124/10 P). It now concludes that the tax exemption granted to EDF cannot be likened to an investment motivated by economic reasons, as the profitability that could be reasonably expected of such an investment was too low. (Mathieu Bion)