The way Barclays (BCS) structured the sale—by booking part of the proceeds in Luxembourg—allowed it to do something not possible under most tax systems: generate a tax loss from a tax-exempt transaction, a Reuters analysis of previously unreported company filings and statements shows.

The move has helped Barclays to earn billions of dollars almost tax free.

The entirely legal deal is the latest example of the ways in which some companies are able to benefit from tax regimes that regulators around the world are trying to crack down on so they can raise more tax revenue at home.

The small European state of Luxembourg is among those coming under scrutiny for its tax regime that local authorities and lawyers say is a legitimate way to attract business.

Barclays‘ tax loss was made possible because it sold its Barclays Global Investors (BGI) business tax free in Britain, but had part of the sale proceeds—$9 billion in Blackrock shares—paid to a subsidiary in Luxembourg.

That way, Barclays was able to offset the risk of the shares losing value, something not normally possible in a tax-free deal. A rise would have netted Barclays profits. When instead the shares fell, Barclays used the loss to claim a tax deduction in Luxembourg that was not available in the UK.

Barclays‘ subsidiary in Luxembourg, one of Europe’s smallest states with just half a million people, lost $2.6 billion when the Blackrock (BLK) shares fell, but has earned almost double the amount virtually tax free since 2012, partly by offsetting some of the Blackrock loss.

Barclays spokeswoman Candice MacDonald said the structure of the BGI sale was not aimed at securing a tax reduction but intended to secure a simpler and more certain tax treatment and avoid volatility in the bank’s regulatory capital. Blackrock declined comment.

Tax advisers say there is nothing wrong with companies organizing their affairs to take advantage of generous tax treatments offered by different countries.

“It would be very odd to criticise that or say it’s inappropriate,” said Neal Todd, tax partner at Berwin Leighton Paisner. “If governments aren’t happy with the law, they should change it.”

TAILS YOU DON’T LOSE

The European Commission is investigating whether Luxembourg has broken EU rules by not applying its tax rules appropriately, offering companies an unfair tax advantage. Last year it said the state did break those rules in a deal with carmaker Fiat.

The Grand Duchy, a founder member of the bloc, says it is making itself an attractive financial centre using only legitimate means.

Barclays is not part of the EU investigation, since the structure of the BGI sale involves using an unusual law in a straightforward manner rather than any inappropriate interpretation of the rules.

The bank is one of hundreds of companies which lawyers say have benefited from Luxembourg’s little-known ‘Heads you win, tails you don’t lose’ tax treatment of significant shareholdings which Reuters reported on in 2013.

The treatment runs counter to the symmetry principle fundamental to most tax systems: where profits are taxable, losses are tax deductible, but if a gain or income is tax-exempt, corresponding losses cannot reduce tax on other income.

What some politicians say sets Barclays apart is that, like all UK banks, it got significant support from taxpayers during the financial crisis.

The government offered more than £600 billion in credit to the banking sector through support schemes and bought stakes in some banks, enabling them to pay their debts to others likeBarclays.

TAXPAYER SUPPORT

Campaigners like Molly Scott Cato, member of the European Parliament for the Green Party, say this makes Barclays‘ tax savings unacceptable.

“They should have greater social responsibility after the financial crisis that we are all still paying for,” she said.

She also said the Grand Duchy’s tax rules should not deviate from international norms like the symmetry principle and help companies shift profits and losses. “It is creating an uneven playing field,” she said.

The Luxembourg Ministry of Finance did not respond to requests for comment but has previously denied using tax rules to unfairly attract investment and jobs.

Barclays has said it does appreciate the taxpayer support it and peers received and it adopted a set of tax principles in 2013 that ensures it behaves in a socially responsible way. These principles bar artificial tax planning.

Tax lawyers in Luxembourg say no other EU country offers the same asymmetric treatment of share sales and credit the law with making Luxembourg an attractive location for holding companies.

Scott Cato and others say the Luxembourg law should be scrapped, but tax lawyers say it is very difficult for the EU to force countries to change laws covering income and capital gains taxes, since bloc rules give national governments sole responsibility in this area.

FROM PROFIT TO TAX LOSS

The sale delivered significant windfalls for senior Barclays executives although none of them benefited from the Luxembourg structure, because their gains were assessed under their personal income tax systems.

Bob Diamond, the head of investment banking who would later go on to lead Barclays group, netted gains of $33 million, according to a 2009 bank filing. His deputy Richard Ricci was also one of the largest shareholders in BGI, but the head of BGI, Blake Grossman, was the largest beneficiary, as the second-largest shareholder in BGI after Barclays.

In all, minority shareholders in BGI—mainly BGI and Barclays executives—received over 500 million pounds from the sale of BGI, according to Barclays 2009 annual report.

The possibility that Barclays could benefit from the law was not a given when the bank began courting buyers for BGI in early 2009.

Analysts predicted a $10 billion price tag but Barclays agreed a $13.5 billion sale to Blackrock on condition it accepted around half the money in shares, then trading at $180 each.

The risk for Barclays was that, if those shares fell in value by the time the bank came to sell them, then the BGI windfall might not end up as large as it hoped.

When the deal went through in Dec. 2009, Barclays sold BGI to Blackrock for $6.6 billion in cash and shares now worth almost $9 billion, thanks to a Blackrock share price jump to $227 each.

Barclays told Blackrock to issue those shares not to BGI’s UK owner Barclays Global Investors UK, but to a recently created Luxembourg company called Barclays BR Holdings Sarl.

When Barclays decided to sell its shares in Blackrock in 2012, the U.S. asset manager’s stock had fallen back to $160.

Even at this share price, the BGI sale had netted Barclays a profit of well over $10 billion, but the bank now had a paper loss of $2.6 billion in Luxembourg, filings show. And being Luxembourg, that loss was deductible against other income.

Much of tax loss from the Blackrock share sale remains because Barclays also generated other tax losses from investments held in Luxembourg, the Barclays spokeswoman said.

Barclays had no branch network and only 14 staff in Luxembourg. But it structured some of its most profitable deals so that it could also report large profits there.

In the three years since selling the Blackrock stake, Barclays has made profits of $3.5 billion in Luxembourg, its filings show. The tax it paid on this income totaled $35 million.