The European Commission (EC) has launched an in-depth investigation on tax treatment of Finnish packaging solutions provider Huhtamaki in Luxembourg.
The regulator will assess whether tax rulings approved by Luxembourg to Huhtamaki may have offered competitive advantage in breach of EU State aid rules.
The EC’s investigation will focus on three tax rulings issued by the country to the Luxembourg-based company Huhtalux in 2009, 2012 and 2013.
Huhtalux, which is a business unit of Huhtamäki group, conducts intra-group financing activities.
The firm secures interest-free loans from another company of the Huhtamäki group based in Ireland. Later, the firm will use these funds to finance other Huhtamäki group companies via interest-bearing loans.
The 2009 tax ruling was revealed under Luxleaks investigation carried out by the International Consortium of Investigative Journalists in 2014.
The three tax rulings issued by Luxembourg enable Huhtalux to unilaterally deduct from its taxable base fictitious interest payments for the interest-free loans it receives.
According to Luxembourg, the fictitious expenses correspond to interest payments that an independent third party in the market would have demanded for the loans that Huhtalux receives.
The commission is expecting that Luxembourg has accepted a unilateral downward adjustment of Huhtalux’s taxable base, which may provide a selective advantage to the company.
This tax treatment may enable the company to pay less tax than other stand-alone or group companies whose transactions are priced as per the market terms.
EC competition policy in charge Margrethe Vestager said: “Member States should not allow companies to set up arrangements that unduly reduce their taxable profits and give them an unfair advantage over their competitors.
“The Commission will carefully investigate Huhtamäki’s tax treatment in Luxembourg to assess whether it is in line with EU State aid rules.”
Huhtamäki provides consumer packaging solutions, with a main focus on food and food service packaging. The firm converts plastics and paperboard into rigid thin-walled food and beverage cups and containers, which are marketed to the customers in Europe, Asia and Australia.