According to the European Court of Justice, the European Commission and the EU General Court erred in their analysis of a long-running corporate tax case, meaning the French utility group Engie will not have to reimburse €120m in taxes to Luxembourg. Photo: Shutterstock

According to the European Court of Justice, the European Commission and the EU General Court erred in their analysis of a long-running corporate tax case, meaning the French utility group Engie will not have to reimburse €120m in taxes to Luxembourg. Photo: Shutterstock

A new twist emerged on Tuesday 5 December in the case of the tax rulings granted to the Engie group by Luxembourg’s tax administration. The European Court of Justice ruled that the European Commission disregarded EU law in its examination of the case. Its decision is therefore annulled.

The Engie tax rulings case, which has been ongoing since 2018, took a new twist on Tuesday. In a judgment on 5 December 2023, the European Court of Justice said that the European Commission had “erred in determining the reference system constituting the starting point for the comparative examination to be carried out in the assessment of the selectivity of those tax measures and thus of their classification as prohibited state aid.” In other words, the commission should not have established “a derogation from a reference framework merely by finding, as it did in the present case, that a measure departs from a general objective of taxing all companies resident in the member state concerned, without taking account of provisions of national law specifying the manner in which that objective is to be implemented.”

The legal battle began when the European Commission stated that, in 2018, it had found that the Luxembourg tax authorities had adopted two series of tax rulings in connection with complex corporate and financial arrangements within the Engie group. According to the commission, the administrative decisions had enabled the Engie group to avoid taxation of a large proportion of the profits of its Luxembourg subsidiaries. It said that Luxembourg should recover this loss of revenue, amounting to around €120m.

Defending their positions, Engie and Luxembourg then took their case to the EU general court in May 2021, which rejected their action for annulment, leading them to appeal to the top EU court. 

To find in favour of Brussels, the commission would have had to prove that the measure introduced by Luxembourg conferred a selective advantage on Engie, firstly by identifying what the ‘normal’ tax regime advocates, and then by proving that the measure leads to a differentiation between companies that would be in a comparable situation.

The decision annulled by the CJEU

Luxembourg argued that the provisions of its law “do not explicitly make the exemption at the level of a parent company of income from holdings subject to taxation at the level of its subsidiary of the profits distributed”. However, the commission did not take this into account and “departed from this interpretation”, whereas it was “in principle obliged to accept the interpretation of the provisions of national law given by the member state”.

The lower court had therefore wrongly confirmed the European Commission’s finding. In conclusion, the ECJ found that “the commission committed errors in its various analyses”. These errors vitiated the entire procedure and led the court to annul the commission’s decision.

Originally published in French by and translated for Delano

Related articles