The Commission says its investigation will focus on whether the Luxembourg tax authorities selectively derogated from provisions of national tax law in tax rulings issued to GDF Suez, which it says appear to treat the same financial transaction between companies of GDF Suez in an inconsistent way, both as debt and as equity.

Margrethe Vestager, Commissioner in charge of competition policy, said: ‘Financial transactions can be taxed differently depending on the type of transaction, equity or debt - but a single company cannot have the best of two worlds for one and the same transaction.

‘Therefore, we will look carefully at tax rulings issued by Luxembourg to GDF Suez. They seem to contradict national taxation rules and allow GDF Suez to pay less tax than other companies.’

In September 2008, Luxembourg issued several tax rulings concerning the tax treatment of two similar financial transactions between four companies of the GDF Suez group, all based in Luxembourg. These financial transactions are loans that can be converted into equity and bear zero interest for the lender.

One convertible loan was granted in 2009 by LNG Luxembourg (lender) to GDF Suez LNG Supply (borrower); the other in 2011 by Electrabel Invest Luxembourg (lender) to GDF Suez Treasury Management (borrower).

Under the terms of the convertible zero interest loan the borrower would record in its accounts a provision for interest payments, without actually paying any interest to the lender. Interest payments are tax deductible expenses in Luxembourg. The provisioned amounts represent a large proportion of the profit of each borrower.

Had the lender received interest income, it would have been subject to corporate tax in Luxembourg. Instead, the loans are subsequently converted into company shares in favour of the lender. The shares incorporate the value of the provisioned interest payments and thereby generate a profit for the lenders.

However, this profit - which was deducted by the borrower as interest - is not taxed as profit at the level of the lender, because it is considered to be a dividend-like payment, associated with equity investments.

The Commission says this approach appears to give rise to double non-taxation for both lenders and borrowers on profits arising in Luxembourg. The final result seems to be that a significant proportion of the profits recorded by GDF Suez in Luxembourg through the two arrangements are not taxed at all, the Commission claims.

The Commission said that the opening of an in-depth investigation gives interested third parties and the member states concerned an opportunity to submit comments. It does not prejudge the outcome of the investigation. Its latest move follows last month’s ruling that Apple must pay €13m (£11m) in back taxes to Ireland following an investigation into tax ruling there, while it has ongoing investigations into tax agreements between Luxembourg and McDonalds over franchising agreements.