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Firm Seeks Clarification Of EC's Decision On Luxembourg Holding Companies

by Ulrika Lomas,, Brussels

17 August 2006

Tenaris, a leading global manufacturer of pipelines for the oil and gas industry, is seeking clarification of the decision by the European Commission concerning the phasing out of Luxembourg's special tax regime for holding companies.

As a holding company under Luxembourg’s 1929 regime, Tenaris is exempt from corporate income tax and certain other Luxembourg taxes and its dividend payments are exempt from withholding tax.

Last month, The EC announced that after an investigation, opened in February, and a preliminary four-year review, it had concluded that the preferential tax regime in favour of Luxembourg’s Exempt, Milliardaire and 1929 Financial Holding companies violates EC Treaty state aid rules.

According to the EC, the scheme grants "unjustified tax advantages" to providers of certain financial services who set up holding structures in Luxembourg and has ordered the government to dismantle the regime by the end of 2006, but has allowed for a transition period allowing existing companies under the scheme to continue benefiting from it until 2010.

However, Tenaris pointed out in a statement that under Article 2, paragraph 3, of the decision, such benefit would appear to terminate if all or part of the capital of such companies is transferred during the transition period. Tenaris believes, based on the reasons that led the EC to allow a transition period, that the above described effect should not apply to listed companies with publicly-traded securities.

"As neither listed companies nor their shareholders are able to prevent trading in the listed companies’ shares, a different interpretation would defeat the purpose of the transition period that the EC deemed necessary to accommodate the expectations and reorganization needs of such companies and their shareholders," the company stated.

While Tenaris said it was "confident" that the EC of the government of Luxembourg would take steps to clarify the wording regarding capital transfers during the transition period, it intends to take "appropriate legal action" in the event the authorities fail timely to confirm Tenaris’s interpretation.

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