On Thursday 7 March, the European Commission opened an in-depth investigation to examine whether the tax rulings granted by the Grand Duchy of Luxembourg to Finnish food packaging company Huhtamäki are in line with EU State aid rules.
The investigation concerns three tax rulings granted in 2009, 2012 and 2013 to the Luxembourg-based company Huhtalux S.à r.l, which is part of the Finnish Huhtamäki group. Huhtalux, which provides intra-group financing, receives interest-free loans from another company in the Huhtamäki group based in Ireland. Huhtalux then uses these funds to finance other companies in the Huhtamäki group through interest-bearing loans.
The three rulings in question allow Huhtalux to unilaterally deduct from its taxable base fictitious interest payments for the interest-free loans.
While Luxembourg considers that these fictitious payments correspond to the interest that a third party market operator would have charged on the loans granted to Huhtalux, the latter does not pay interest. As a result of the deductions it enjoys, Huhtalux’staxable profit is lower than it should be.
The Commission is concerned that the tax treatment granted to Huhtalux may give it a selective advantage over other companies or group members. If such were the case, this tax regime would be incompatible with EU State aid rules.
If the institution were to rule in this way, it would not be the first time that Luxembourg’s tax rulings had been sanctioned. In October 2017 and June 2018, the Commission ordered the Grand Duchy to recover substantial sums from Amazon and Engie for State aid incompatible with EU law (see EUROPE 11876/13, 12045/16). (Original version in French by Lucas Tripoteau)