A tax concession that Luxembourg authorities granted to Fiat Finance and Trade in 2012 may constitute illegal state aid, the European Commission said earlier this week.

The probe focuses on Luxembourg authorities' approval of a transfer pricing arrangement by Fiat Finance and Trade, which lends money to other Fiat companies.

Transfer pricing is the setting of prices for intra-group transactions that affects the tax rate that multinationals pay in different countries.

"Fiat remains confident of the legitimacy of the tax ruling process regarding Fiat Finance and Trade in Luxembourg and, in any case, is of the view that the group's potential financial exposure associated with the case is immaterial," Fiat said in a statement.

(Reporting by Oleg Vukmanovic)