State aid: Huhtamäki group

On 7 March 2019, the European Commission ("EC") announced the opening of an in-depth State aid investigation concerning three tax rulings issued by the Luxembourg tax authorities to the benefit of a Luxembourg company of the Huhtamäki group.

According to the EC’s press release, the Luxembourg company, which carried out intra-group financing activities, has been granted interest-free loans from an Irish group company and used the funds to grant in turn interest bearing loans to other group companies. The rulings confirmed that the Luxembourg company can deduct from its taxable base an amount of deemed interest on the interest-free loans corresponding to interest payments that an independent third party would have required for such loans. As a result, the Luxembourg company is taxed on a substantially smaller profit.

The EC will investigate into whether Luxembourg has granted the Luxembourg company a selective advantage by accepting this unilateral downward adjustment of its taxable base.

In a press release dated 7 March 2019, the Luxembourg government stated that, in its view, it did not grant Huhtamäki companies a state aid incompatible with the internal market within the meaning of Article 107 (1) of the Treaty on the Functioning of the EU. Nevertheless, the Luxembourg government recalled that it shares the Commission's objective of combating tax evasion and that it is willing to cooperate fully with the Commission during its investigation.