Ryanair is under investigation for allegedly evading up to €4.5m (£3.9m) in payroll taxes in France.
The airline, which is already involved in tit-for-tat lawsuits with Air France about public subsidies, is suspected of employing 120 people in France on Irish contracts.
Under EU law, this is permitted only for short periods or if the employee genuinely works in more than one country.
French officials, who recently raided Ryanair's offices at Marseilles airport, suspect that the Dublin-based airline employs 120 people full-time in France, including 30 pilots, but pays their social charges in Ireland.
French social security and other payroll taxes are up to three times higher than in Ireland and fall especially hard on the employer. By employing French-based staff on Irish contracts, Ryanair is accused of gaining an unfair competitive advantage and, in effect, cheating the French government.
British cut-price airline, easyJet, was found guilty early this month of travail dissimulé — employing undeclared workers — after it hired 170 people on British contracts at Orly airport in Paris between 2003 and 2006. The airline, which insisted it had not knowingly broken the law, was ordered to pay €1.4m to the French state.
A formal investigation has now been launched against Ryanair by the public prosecutor in the Aix-en-Provence region, which covers Marseilles airport. The Irish carrier is suspected of travail dissimulé, as well as “illicit lending out of workers” and “illicit employment of flight crew”.
The airline said it had not been told about the investigation and could not comment. French judicial authorities are expected to seek an international warrant to question senior Ryanair executives in Dublin.
Ryanair flies to more than a dozen destinations in France from Dublin and British airports. It has built a successful network between regional airports in France and other EU countries. Marseilles is its major hub.
There are grey areas in EU law about the payment of social charges. An employee must always pay income tax in the country where he or she works but bilateral deals between governments sometimes allow social charges to be paid, for fixed periods, in the employer's or employee's home country.
Ryanair has also been accused by Air France of claiming illegal public subsidies from French local authorities to fly to regional airports. Ryanair has launched a countersuit against Air France, accusing the French flag-carrier of receiving hidden subsidies and advantages from the state.
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