The European Commission has decided that the preferential tax regime in favour of Luxembourg's Exempt, Milliardaire and Financial Holdings of 1929 violates EC Treaty state aid rules.

According to the Commission statement, the scheme is granted under a Luxembourg law from 1929, predating the EC Treaty, and therefore constituting existing aid. Following an in-depth investigation opened in February and a preliminary four-year review, the Commission has concluded that the scheme grants unjustified tax advantages to providers of certain financial services who set up holding structures in Luxembourg. It distorts competition and trade by altering the level playing field between financial undertakings and induces them to create dedicated structures in Luxembourg to reduce their current tax liabilities. Modifications introduced by a law of 21 June 2005 narrowed the scope of the scheme but the regime still constitutes state aid as the tax advantages remain unchanged.

The Commission decision requires the scheme to be repealed by the end of 2006, while its effects for the existing holdings must be definitively eliminated by the end of 2010 (allowing the existing beneficiaries to exit from the existing holding structures without incurring tax penalties). As the scheme is existing aid, the Commission's decision is only for the future and the beneficiaries need not repay aid received until its final elimination.