# 62018CJ0749

JUDGMENT OF THE COURT (Second Chamber)

14 May 2020 (
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(Reference for a preliminary ruling – Articles 49 and 54 TFEU – Freedom of establishment – Tax legislation – Taxation of companies – Parent companies and subsidiaries – Vertical and horizontal tax integration)

In Case C‐749/18,

REQUEST for a preliminary ruling under Article 267 TFEU from the Cour administrative (Higher Administrative Court, Luxembourg), made by decision of 29 November 2018, received at the Court on 30 November 2018, in the proceedings

B and Others

B and Others

v

Administration des contributions directes,

Administration des contributions directes,

THE COURT (Second Chamber),

composed of A. Arabadjiev (Rapporteur), President of the Chamber, K. Lenaerts, President of the Court, acting as Judge of the Second Chamber, P.G. Xuereb, T. von Danwitz and A. Kumin, Judges,

Advocate General: P. Pikamäe,

Registrar: A. Calot Escobar,

having regard to the written procedure,

having considered the observations submitted on behalf of:

| – | B and Others, by G. Simon, avocat, |
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–

B and Others, by G. Simon, avocat,

| – | the Luxembourg Government, by D. Holderer, acting as Agent, |
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–

the Luxembourg Government, by D. Holderer, acting as Agent,

| – | the Italian Government, by G. Palmieri, acting as Agent, and by P. Gentili, avvocato dello Stato, |
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–

the Italian Government, by G. Palmieri, acting as Agent, and by P. Gentili, avvocato dello Stato,

| – | the European Commission, by W. Roels and A. Armenia, acting as Agents, |
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–

the European Commission, by W. Roels and A. Armenia, acting as Agents,

having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,

gives the following

Judgment

Judgment

| 1 | This request for a preliminary ruling concerns the interpretation of Articles 49 and 54 TFEU. |
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1

This request for a preliminary ruling concerns the interpretation of Articles 49 and 54 TFEU.

| 2 | The request has been made in proceedings between three companies governed by Luxembourg law, B, C and D, and the administration des contributions directes (direct taxation authority, Luxembourg), concerning the rejection of their joint request to benefit from the tax integration scheme as regards the 2013 and 2014 tax years. |
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2

The request has been made in proceedings between three companies governed by Luxembourg law, B, C and D, and the administration des contributions directes (direct taxation authority, Luxembourg), concerning the rejection of their joint request to benefit from the tax integration scheme as regards the 2013 and 2014 tax years.

Legal background

Legal background

| 3 | Article 164a of the loi modifiée du 4 décembre 1967 concernant l’impôt sur le revenu (amended Law of 4 December 1967 on income tax) (Mémorial A 1967, p. 1228), in the version applicable to the 2013 and 2014 tax years (‘Article 164a of the LIR’), provided:
  ‘(1)   Fully taxable resident capital companies, of which at least 95% of the capital is directly or indirectly held by another fully taxable resident capital company or by a domestic permanent establishment of a non-resident capital company which is fully liable to a tax corresponding to corporation tax, may, upon request, be fiscally integrated into the parent company or into the domestic permanent establishment, in order to aggregate their respective taxable income with that of the parent company or domestic permanent establishment.
  ...
  (4)   To join the tax integration scheme, a joint written request shall be made by the parent company or the domestic permanent establishment and by the subsidiaries concerned. The request shall be submitted to the administration des contributions directes (direct taxation authority) before the end of the first tax year of the period for which admission to the tax integration scheme is sought, and that period shall cover at least 5 tax years. ...’ |
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3

Article 164a of the loi modifiée du 4 décembre 1967 concernant l’impôt sur le revenu (amended Law of 4 December 1967 on income tax) (Mémorial A 1967, p. 1228), in the version applicable to the 2013 and 2014 tax years (‘Article 164a of the LIR’), provided:

Mémorial

‘(1)   Fully taxable resident capital companies, of which at least 95% of the capital is directly or indirectly held by another fully taxable resident capital company or by a domestic permanent establishment of a non-resident capital company which is fully liable to a tax corresponding to corporation tax, may, upon request, be fiscally integrated into the parent company or into the domestic permanent establishment, in order to aggregate their respective taxable income with that of the parent company or domestic permanent establishment.

...

(4)   To join the tax integration scheme, a joint written request shall be made by the parent company or the domestic permanent establishment and by the subsidiaries concerned. The request shall be submitted to the administration des contributions directes (direct taxation authority) before the end of the first tax year of the period for which admission to the tax integration scheme is sought, and that period shall cover at least 5 tax years. ...’

| 4 | Article 164a of the LIR was amended by the Law of 18 December 2015 (Mémorial A 2015, p. 5989), with effect from 1 January 2015 (‘Article 164a of the LIR, as amended’). That provision reads as follows:
  ‘(1)   For the purposes of the present article, the following definitions shall apply:





  1. | “integrated company”: a fully taxable resident capital company or a domestic permanent establishment of a non-resident capital company which is fully liable to a tax corresponding to corporation tax; |
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4

Article 164a of the LIR was amended by the Law of 18 December 2015 (Mémorial A 2015, p. 5989), with effect from 1 January 2015 (‘Article 164a of the LIR, as amended’). That provision reads as follows:

Mémorial

‘(1)   For the purposes of the present article, the following definitions shall apply:

1.

“integrated company”: a fully taxable resident capital company or a domestic permanent establishment of a non-resident capital company which is fully liable to a tax corresponding to corporation tax;

| 2. | “integrating parent company”: a fully taxable resident capital company or a domestic permanent establishment of a non-resident capital company which is fully liable to a tax corresponding to corporation tax; |
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2.

“integrating parent company”: a fully taxable resident capital company or a domestic permanent establishment of a non-resident capital company which is fully liable to a tax corresponding to corporation tax;

| 3. | “non-integrating parent company”: a fully taxable resident capital company or a domestic permanent establishment of a non-resident capital company which is fully liable to a tax corresponding to corporation tax or a capital company resident in another State party to the Agreement on the European Economic Area (EEA) which is fully liable to a tax corresponding to corporation tax or a permanent establishment of a capital company which is fully liable to a tax corresponding to corporation tax located in another State party to the Agreement on the [EEA] and fully liable in that State to a tax corresponding to corporation tax; |
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3.

“non-integrating parent company”: a fully taxable resident capital company or a domestic permanent establishment of a non-resident capital company which is fully liable to a tax corresponding to corporation tax or a capital company resident in another State party to the Agreement on the European Economic Area (EEA) which is fully liable to a tax corresponding to corporation tax or a permanent establishment of a capital company which is fully liable to a tax corresponding to corporation tax located in another State party to the Agreement on the [EEA] and fully liable in that State to a tax corresponding to corporation tax;

| 4. | “integrating subsidiary company”: a fully taxable resident capital company or a domestic permanent establishment of a non-resident capital company which is fully liable to a tax corresponding to corporation tax; |
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4.

“integrating subsidiary company”: a fully taxable resident capital company or a domestic permanent establishment of a non-resident capital company which is fully liable to a tax corresponding to corporation tax;

| 5. | “integrated group”: either a group composed of the integrating parent company and the integrated company(ies) as referred to in subparagraph 2, or a group composed of the integrating subsidiary company and the integrated company(ies) as referred to in subparagraph 3. A member of an integrated group cannot at the same time be part of another integrated group. |
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5.

“integrated group”: either a group composed of the integrating parent company and the integrated company(ies) as referred to in subparagraph 2, or a group composed of the integrating subsidiary company and the integrated company(ies) as referred to in subparagraph 3. A member of an integrated group cannot at the same time be part of another integrated group.

...’

The dispute in the main proceedings and the questions referred for a preliminary ruling

The dispute in the main proceedings and the questions referred for a preliminary ruling

| 5 | B is a company governed by Luxembourg law which is resident for tax purposes in Luxembourg. Its parent company, A, is a public limited liability company governed by French law which is resident for tax purposes in France. |
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5

B is a company governed by Luxembourg law which is resident for tax purposes in Luxembourg. Its parent company, A, is a public limited liability company governed by French law which is resident for tax purposes in France.

| 6 | With effect from 1 January 2008, B and its subsidiary E formed a vertically integrated tax group under the tax integration scheme, within the meaning of Article 164a of the LIR. That group was gradually expanded to include other subsidiaries of B, as follows: from 1 January 2010, F, from 1 January 2011, G (which was subsequently absorbed by F), from 1 January 2012, H, and from 1 January 2013, I, J, K and L. Within this vertically integrated tax group, as it gradually expanded, B assumed the role of integrating parent company in that it held at least 95% of the capital in all subsidiaries having their head office and central administration in Luxembourg, and was taxed on the consolidated results of all the companies within the group. |
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6

With effect from 1 January 2008, B and its subsidiary E formed a vertically integrated tax group under the tax integration scheme, within the meaning of Article 164a of the LIR. That group was gradually expanded to include other subsidiaries of B, as follows: from 1 January 2010, F, from 1 January 2011, G (which was subsequently absorbed by F), from 1 January 2012, H, and from 1 January 2013, I, J, K and L. Within this vertically integrated tax group, as it gradually expanded, B assumed the role of integrating parent company in that it held at least 95% of the capital in all subsidiaries having their head office and central administration in Luxembourg, and was taxed on the consolidated results of all the companies within the group.

| 7 | C and D are companies governed by Luxembourg law and resident for tax purposes in Luxembourg, the capital of which is indirectly held by the French company A. B does not hold any part of the capital in those two companies. |
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7

C and D are companies governed by Luxembourg law and resident for tax purposes in Luxembourg, the capital of which is indirectly held by the French company A. B does not hold any part of the capital in those two companies.

| 8 | By two letters dated 8 December 2014 and filed on 22 December 2014, B, C and D requested to benefit from the tax integration scheme under Article 164a of the LIR, from 1 January 2013 and from 1 January 2014 respectively. |
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8

By two letters dated 8 December 2014 and filed on 22 December 2014, B, C and D requested to benefit from the tax integration scheme under Article 164a of the LIR, from 1 January 2013 and from 1 January 2014 respectively.

| 9 | By decision of 3 February 2015, company tax office 6 of the direct taxation authority (Luxembourg; ‘the tax office’) rejected those requests on the ground that B, C and D did not satisfy the requirements of Article 164a of the LIR. |
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9

By decision of 3 February 2015, company tax office 6 of the direct taxation authority (Luxembourg; ‘the tax office’) rejected those requests on the ground that B, C and D did not satisfy the requirements of Article 164a of the LIR.

| 10 | B, C and D lodged an objection to that decision on 27 April 2015. On 12 August 2016, having received no response to that objection, they brought an action before the tribunal administratif (Administrative Court, Luxembourg), seeking to have the tax office’s decision of 3 February 2015 varied or annulled. |
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10

B, C and D lodged an objection to that decision on 27 April 2015. On 12 August 2016, having received no response to that objection, they brought an action before the tribunal administratif (Administrative Court, Luxembourg), seeking to have the tax office’s decision of 3 February 2015 varied or annulled.

| 11 | By judgment of 6 December 2017, the Administrative Court held the action to be unfounded as regards admission to the tax integration scheme from 1 January 2013, on the ground that a request to that effect would have had to be received by the authority before the end of the first tax year of the period in respect of which tax integration was requested, in other words before the end of 2013. |
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11

By judgment of 6 December 2017, the Administrative Court held the action to be unfounded as regards admission to the tax integration scheme from 1 January 2013, on the ground that a request to that effect would have had to be received by the authority before the end of the first tax year of the period in respect of which tax integration was requested, in other words before the end of 2013.

| 12 | By contrast, as regards the 2014 tax year, the Administrative Court held that the action was well founded, and that the prohibition resulting from Article 164a of the LIR, which prevents a non-resident parent company established in another Member State from forming a tax entity made up of its resident subsidiaries, whereas that possibility is open to a resident parent company by means of vertical integration, is incompatible with the freedom of movement and freedom of establishment referred to in Articles 49 and 54 TFEU. |
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12

By contrast, as regards the 2014 tax year, the Administrative Court held that the action was well founded, and that the prohibition resulting from Article 164a of the LIR, which prevents a non-resident parent company established in another Member State from forming a tax entity made up of its resident subsidiaries, whereas that possibility is open to a resident parent company by means of vertical integration, is incompatible with the freedom of movement and freedom of establishment referred to in Articles 49 and 54 TFEU.

| 13 | By application lodged on 15 January 2018, B, C and D appealed against that judgment to the referring court, the Cour administrative (Higher Administrative Court, Luxembourg), in so far as their action concerning the 2013 tax year had been held to be unfounded. B, C and D submit that it is contrary to the principle of effectiveness of EU law to refuse them the benefit of the tax integration scheme as from 1 January 2013 on the ground that a purely formal requirement, namely observance of the time limit within which the request must be submitted, has not been satisfied. They contend that such a requirement would have been excessively difficult to satisfy, having regard to the administrative and judicial positions adopted by Luxembourg, as they were in 2013, which stood in the way of any request for horizontal tax integration. B, C and D state that they lodged their request as soon as the judgment of 12 June 2014, SCA Group Holding and Others (C‐39/13 to C‐41/13, EU:C:2014:1758) had supplied the legal arguments for them to submit, on the basis of EU law, that they were entitled to the benefit of the tax integration scheme provided for by the Luxembourg legislation, given that there was a pre-existing integrated tax group. |
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13

By application lodged on 15 January 2018, B, C and D appealed against that judgment to the referring court, the Cour administrative (Higher Administrative Court, Luxembourg), in so far as their action concerning the 2013 tax year had been held to be unfounded. B, C and D submit that it is contrary to the principle of effectiveness of EU law to refuse them the benefit of the tax integration scheme as from 1 January 2013 on the ground that a purely formal requirement, namely observance of the time limit within which the request must be submitted, has not been satisfied. They contend that such a requirement would have been excessively difficult to satisfy, having regard to the administrative and judicial positions adopted by Luxembourg, as they were in 2013, which stood in the way of any request for horizontal tax integration. B, C and D state that they lodged their request as soon as the judgment of 12 June 2014, SCA Group Holding and Others (C‐39/13 to C‐41/13, EU:C:2014:1758) had supplied the legal arguments for them to submit, on the basis of EU law, that they were entitled to the benefit of the tax integration scheme provided for by the Luxembourg legislation, given that there was a pre-existing integrated tax group.

| 14 | Before the referring court, the direct taxation authority submits that the Administrative Court’s judgment of 6 December 2017 should be upheld, in so far as that court confirmed the refusal of admission to the tax integration scheme as regards the period beginning 1 January 2013. The direct taxation authority nevertheless brought a cross-appeal against that judgment, in so far as the Administrative Court had held that the action brought by B, C and D was well founded as regards the 2014 tax year. |
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14

Before the referring court, the direct taxation authority submits that the Administrative Court’s judgment of 6 December 2017 should be upheld, in so far as that court confirmed the refusal of admission to the tax integration scheme as regards the period beginning 1 January 2013. The direct taxation authority nevertheless brought a cross-appeal against that judgment, in so far as the Administrative Court had held that the action brought by B, C and D was well founded as regards the 2014 tax year.

| 15 | In those circumstances, the Higher Administrative Court decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:





  ‘(1) | Must Articles 49 and 54 TFEU be interpreted as precluding the legislation of a Member State relating to a tax integration scheme which, on the one hand, permits consolidation of the results of companies forming part of the same group and allows vertical tax integration only between a resident parent company or a permanent native establishment of a non-resident parent company and its resident subsidiaries and, on the other hand, similarly precludes the purely horizontal tax integration of the subsidiaries alone of both a non-resident parent company with no permanent native establishment and a resident or non-resident parent company which has a permanent local establishment? |
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15

In those circumstances, the Higher Administrative Court decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

‘(1)

Must Articles 49 and 54 TFEU be interpreted as precluding the legislation of a Member State relating to a tax integration scheme which, on the one hand, permits consolidation of the results of companies forming part of the same group and allows vertical tax integration only between a resident parent company or a permanent native establishment of a non-resident parent company and its resident subsidiaries and, on the other hand, similarly precludes the purely horizontal tax integration of the subsidiaries alone of both a non-resident parent company with no permanent native establishment and a resident or non-resident parent company which has a permanent local establishment?

| (2) | If the answer to the first question is in the affirmative, must Articles 49 and 54 TFEU be interpreted as precluding the same legislation of a Member State relating to a tax integration scheme, in particular to strict separation between vertical integration schemes (between a group parent company and its direct or indirect subsidiaries) and horizontal integration schemes (between two or more resident subsidiaries of a group parent company which remains outside the tax integration perimeter) stemming from that legislation, and the resulting obligation to end a pre-existing vertical tax integration arrangement before being able to form a horizontal tax integration group, where:





  – | a vertical tax integration arrangement with an integrating group parent company at national level which is resident in the Member State concerned (which, at the same time, represents the intermediate subsidiary in relation to the ultimate parent company, resident in another Member State) and the resident subsidiaries of the group parent company, had previously been established, on account of the fact that the legislation of the Member State concerned allows only vertical tax integration for the purposes of admission to the scheme, notwithstanding the fact that the ultimate parent company is resident in another Member State; |
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(2)

If the answer to the first question is in the affirmative, must Articles 49 and 54 TFEU be interpreted as precluding the same legislation of a Member State relating to a tax integration scheme, in particular to strict separation between vertical integration schemes (between a group parent company and its direct or indirect subsidiaries) and horizontal integration schemes (between two or more resident subsidiaries of a group parent company which remains outside the tax integration perimeter) stemming from that legislation, and the resulting obligation to end a pre-existing vertical tax integration arrangement before being able to form a horizontal tax integration group, where:

–

a vertical tax integration arrangement with an integrating group parent company at national level which is resident in the Member State concerned (which, at the same time, represents the intermediate subsidiary in relation to the ultimate parent company, resident in another Member State) and the resident subsidiaries of the group parent company, had previously been established, on account of the fact that the legislation of the Member State concerned allows only vertical tax integration for the purposes of admission to the scheme, notwithstanding the fact that the ultimate parent company is resident in another Member State;

| – | sister companies of the integrating group parent company of the Member State concerned (therefore also subsidiaries of the ultimate parent company resident in another Member State) are denied access to the existing tax integration arrangements on the ground that the two integration schemes, vertical and horizontal, are incompatible; and |
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–

sister companies of the integrating group parent company of the Member State concerned (therefore also subsidiaries of the ultimate parent company resident in another Member State) are denied access to the existing tax integration arrangements on the ground that the two integration schemes, vertical and horizontal, are incompatible; and

| – | the inclusion of the results of those sister companies in the consolidated results of the companies within the group would entail the undoing of the pre-existing vertical tax integration arrangement – with the ensuing negative tax consequences on account of non-compliance with the minimum duration of the integration arrangement required by national law – and the setting up of a new horizontal tax integration arrangement, even though the resident integrating company (at the level at which the results of the fiscally integrated companies are consolidated) remains the same? |
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–

the inclusion of the results of those sister companies in the consolidated results of the companies within the group would entail the undoing of the pre-existing vertical tax integration arrangement – with the ensuing negative tax consequences on account of non-compliance with the minimum duration of the integration arrangement required by national law – and the setting up of a new horizontal tax integration arrangement, even though the resident integrating company (at the level at which the results of the fiscally integrated companies are consolidated) remains the same?

| (3) | If the answer to the second question is also in the affirmative, must Articles 49 and 54 TFEU, together with the principle of effectiveness of EU law, be interpreted as precluding that same legislation of a Member State relating to a tax integration scheme, in particular the imposition of a time limit under which any request seeking admission to the tax integration scheme must necessarily be submitted to the competent authority before the end of the first tax year for which application of that scheme is sought, where:





  – | if the first two questions are answered in the affirmative, that legislation precluded, in a manner incompatible with freedom of establishment, horizontal tax integration between the subsidiaries alone of the same parent company and the modification of an existing vertically fiscally integrated group by the addition of sister companies of the integrating company; |
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(3)

If the answer to the second question is also in the affirmative, must Articles 49 and 54 TFEU, together with the principle of effectiveness of EU law, be interpreted as precluding that same legislation of a Member State relating to a tax integration scheme, in particular the imposition of a time limit under which any request seeking admission to the tax integration scheme must necessarily be submitted to the competent authority before the end of the first tax year for which application of that scheme is sought, where:

–

if the first two questions are answered in the affirmative, that legislation precluded, in a manner incompatible with freedom of establishment, horizontal tax integration between the subsidiaries alone of the same parent company and the modification of an existing vertically fiscally integrated group by the addition of sister companies of the integrating company;

| – | before the publication of [the judgment of 12 June 2014, SCA Group Holding and Others (C‐39/13 to C‐41/13, EU:C:2014:1758)], the national administrative and judicial practice of the Member State concerned was to accept that that legislation was valid; |
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–

before the publication of [the judgment of 12 June 2014, SCA Group Holding and Others (C‐39/13 to C‐41/13, EU:C:2014:1758)], the national administrative and judicial practice of the Member State concerned was to accept that that legislation was valid;

| – | a number of companies submitted, following the publication of the judgment of 12 June 2014 and again before the end of 2014, a request to join an existing fiscally integrated group by being allowed to join a horizontal tax integration arrangement with the integrating company of the existing group, in reliance on [that judgment]; and |
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–

a number of companies submitted, following the publication of the judgment of 12 June 2014 and again before the end of 2014, a request to join an existing fiscally integrated group by being allowed to join a horizontal tax integration arrangement with the integrating company of the existing group, in reliance on [that judgment]; and

| – | that request relates not only to the 2014 tax year still ongoing at the time at which the request was submitted, but also to the previous tax year, 2013, as from which the companies concerned satisfied all the substantive conditions compatible with EU law for admission to the tax integration scheme?’ |
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–

that request relates not only to the 2014 tax year still ongoing at the time at which the request was submitted, but also to the previous tax year, 2013, as from which the companies concerned satisfied all the substantive conditions compatible with EU law for admission to the tax integration scheme?’

Consideration of the questions referred

Consideration of the questions referred

Preliminary observations

Preliminary observations

| 16 | It is apparent from the explanations provided by the referring court, which alone has jurisdiction to interpret national law under the framework of the system of judicial cooperation enshrined in Article 267 TFEU (judgment of 7 November 2018, C and A, C‐257/17, EU:C:2018:876, paragraph 34 and the case-law cited), that Article 164a of the LIR, as amended, introduced the possibility of horizontal tax integration between resident subsidiaries of a non-integrating parent company, whether resident or non-resident. The referring court states, however, that that amendment applies only ‘as from the 2015 tax year’. Consequently, the 2013 and 2014 tax years, which are at issue in the main proceedings, remain governed by Article 164a of the LIR. |
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16

It is apparent from the explanations provided by the referring court, which alone has jurisdiction to interpret national law under the framework of the system of judicial cooperation enshrined in Article 267 TFEU (judgment of 7 November 2018, C and A, C‐257/17, EU:C:2018:876, paragraph 34 and the case-law cited), that Article 164a of the LIR, as amended, introduced the possibility of horizontal tax integration between resident subsidiaries of a non-integrating parent company, whether resident or non-resident. The referring court states, however, that that amendment applies only ‘as from the 2015 tax year’. Consequently, the 2013 and 2014 tax years, which are at issue in the main proceedings, remain governed by Article 164a of the LIR.

| 17 | The referring court also states that the tax integration scheme provided for by Article 164a of the LIR is a special scheme for taxation of the consolidated profits of a group of companies and involves all of the integrated companies determining their own accounting and tax results, eliminating from their respective accounting results any double deduction or double taxation that might result from intra-group transactions and consolidating those results at the level of the integrating company – which entails a setting-off of positive and negative results as between the companies in question – in order to arrive at a consolidated tax result in respect of which the integrating company is taxable. Under Article 164a of the LIR, there was no possibility of such tax integration without the participation of the parent company and solely within the perimeter of integration within one single tax jurisdiction. |
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17

The referring court also states that the tax integration scheme provided for by Article 164a of the LIR is a special scheme for taxation of the consolidated profits of a group of companies and involves all of the integrated companies determining their own accounting and tax results, eliminating from their respective accounting results any double deduction or double taxation that might result from intra-group transactions and consolidating those results at the level of the integrating company – which entails a setting-off of positive and negative results as between the companies in question – in order to arrive at a consolidated tax result in respect of which the integrating company is taxable. Under Article 164a of the LIR, there was no possibility of such tax integration without the participation of the parent company and solely within the perimeter of integration within one single tax jurisdiction.

| 18 | Furthermore, in accordance with the case-law of the referring court, the tax integration scheme is open as of right to taxpayers meeting the substantive conditions of Article 164a of the LIR, such that the competent tax office is obliged to give its approval where, following verification, it is satisfied that the substantive conditions are fulfilled. |
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18

Furthermore, in accordance with the case-law of the referring court, the tax integration scheme is open as of right to taxpayers meeting the substantive conditions of Article 164a of the LIR, such that the competent tax office is obliged to give its approval where, following verification, it is satisfied that the substantive conditions are fulfilled.

| 19 | The questions referred should be answered having regard to those considerations. |
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19

The questions referred should be answered having regard to those considerations.

The first question

The first question

| 20 | By its first question, the referring court essentially asks whether Articles 49 and 54 TFEU must be interpreted as precluding legislation of a Member State which, while permitting vertical tax integration between a resident parent company, or a permanent establishment, in that Member State, of a non-resident parent company, and its resident subsidiaries, does not permit horizontal tax integration between resident subsidiaries of a non-resident parent company. |
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20

By its first question, the referring court essentially asks whether Articles 49 and 54 TFEU must be interpreted as precluding legislation of a Member State which, while permitting vertical tax integration between a resident parent company, or a permanent establishment, in that Member State, of a non-resident parent company, and its resident subsidiaries, does not permit horizontal tax integration between resident subsidiaries of a non-resident parent company.

| 21 | Freedom of establishment, which Article 49 TFEU grants to EU nationals, includes the right for them to take up and pursue activities as self-employed persons and to set up and manage undertakings under the conditions laid down for its own nationals by the law of the Member State in which such establishment is effected. It entails, in accordance with Article 54 TFEU, for companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the European Union, the right to exercise their activity in the Member State concerned through a subsidiary, a branch or an agency (judgment of 1 April 2014, Felixstowe Dock and Railway Company and Others, C‐80/12, EU:C:2014:200, paragraph 17 and the case-law cited). |
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21

Freedom of establishment, which Article 49 TFEU grants to EU nationals, includes the right for them to take up and pursue activities as self-employed persons and to set up and manage undertakings under the conditions laid down for its own nationals by the law of the Member State in which such establishment is effected. It entails, in accordance with Article 54 TFEU, for companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the European Union, the right to exercise their activity in the Member State concerned through a subsidiary, a branch or an agency (judgment of 1 April 2014, Felixstowe Dock and Railway Company and Others, C‐80/12, EU:C:2014:200, paragraph 17 and the case-law cited).

| 22 | It should be borne in mind that, in the case of companies, their seat for the purposes of Article 54 TFEU serves, in the same way as nationality in the case of individuals, as the connecting factor with the legal system of a Member State. However, acceptance of the proposition that the Member State of residence may freely apply different treatment merely by reason of the fact that the seat of a company is situated in another Member State would deprive Article 49 TFEU of its meaning. Freedom of establishment seeks to guarantee the benefit of national treatment in the host Member State, by prohibiting any discrimination based on the place in which companies have their seat (judgment of 12 June 2014, SCA Group Holding and Others, C‐39/13 to C‐41/13, EU:C:2014:1758, paragraph 45 and the case-law cited). |
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22

It should be borne in mind that, in the case of companies, their seat for the purposes of Article 54 TFEU serves, in the same way as nationality in the case of individuals, as the connecting factor with the legal system of a Member State. However, acceptance of the proposition that the Member State of residence may freely apply different treatment merely by reason of the fact that the seat of a company is situated in another Member State would deprive Article 49 TFEU of its meaning. Freedom of establishment seeks to guarantee the benefit of national treatment in the host Member State, by prohibiting any discrimination based on the place in which companies have their seat (judgment of 12 June 2014, SCA Group Holding and Others, C‐39/13 to C‐41/13, EU:C:2014:1758, paragraph 45 and the case-law cited).

| 23 | A tax integration scheme such as that at issue in the main proceedings constitutes a tax advantage for the companies concerned. By allowing the profits and losses of the integrated companies to be set off and consolidated within the integrating parent company, the tax integration scheme confers a cash advantage on the group (see, by analogy, judgment of 12 June 2014, SCA Group Holding and Others, C‐39/13 to C‐41/13, EU:C:2014:1758, paragraph 46). |
| --- | --- |

23

A tax integration scheme such as that at issue in the main proceedings constitutes a tax advantage for the companies concerned. By allowing the profits and losses of the integrated companies to be set off and consolidated within the integrating parent company, the tax integration scheme confers a cash advantage on the group (see, by analogy, judgment of 12 June 2014, SCA Group Holding and Others, C‐39/13 to C‐41/13, EU:C:2014:1758, paragraph 46).

| 24 | Under Article 164a LIR, such a tax advantage is conferred on parent companies which are resident in Luxembourg or on permanent establishments, in that Member State, of non-resident parent companies, by allowing the tax results of resident subsidiaries to be consolidated at the level of those parent companies and permanent establishments. |
| --- | --- |

24

Under Article 164a LIR, such a tax advantage is conferred on parent companies which are resident in Luxembourg or on permanent establishments, in that Member State, of non-resident parent companies, by allowing the tax results of resident subsidiaries to be consolidated at the level of those parent companies and permanent establishments.

| 25 | The legislation at issue in the main proceedings thus creates a difference of treatment between, on the one hand, parent companies which have their seat in Luxembourg – which, under the tax integration scheme, are able, inter alia, to set off the profits of their profit-making subsidiaries against the losses of their loss-making subsidiaries – and, on the other hand, parent companies which similarly have subsidiaries in Luxembourg, but which have their seat in another Member State and do not possess a permanent establishment in Luxembourg – which are unable to benefit from the tax integration scheme or, consequently, from the tax advantage which that scheme confers. |
| --- | --- |

25

The legislation at issue in the main proceedings thus creates a difference of treatment between, on the one hand, parent companies which have their seat in Luxembourg – which, under the tax integration scheme, are able, inter alia, to set off the profits of their profit-making subsidiaries against the losses of their loss-making subsidiaries – and, on the other hand, parent companies which similarly have subsidiaries in Luxembourg, but which have their seat in another Member State and do not possess a permanent establishment in Luxembourg – which are unable to benefit from the tax integration scheme or, consequently, from the tax advantage which that scheme confers.

| 26 | The difference in treatment, as established in the preceding paragraph of this judgment, is not placed in doubt by the arguments advanced by the Luxembourg Government, which submits, in its written observations, that all companies subject to the tax jurisdiction of the Grand Duchy of Luxembourg benefit from the same treatment. The Luxembourg Government argues, first, that, if a non-resident parent company possesses a permanent establishment in Luxembourg, that permanent establishment would be able to benefit from the same treatment as resident parent companies. Secondly, it submits that, even in a purely internal situation, tax integration between the subsidiaries of a parent company is impossible without the participation of the parent company. |
| --- | --- |

26

The difference in treatment, as established in the preceding paragraph of this judgment, is not placed in doubt by the arguments advanced by the Luxembourg Government, which submits, in its written observations, that all companies subject to the tax jurisdiction of the Grand Duchy of Luxembourg benefit from the same treatment. The Luxembourg Government argues, first, that, if a non-resident parent company possesses a permanent establishment in Luxembourg, that permanent establishment would be able to benefit from the same treatment as resident parent companies. Secondly, it submits that, even in a purely internal situation, tax integration between the subsidiaries of a parent company is impossible without the participation of the parent company.

| 27 | In this regard, it should be observed, first of all, that it is apparent from the request for a preliminary ruling that the main proceedings do not relate to the possibility of a non-resident parent company being included in the Luxembourg tax integration scheme in the same way as its resident subsidiaries, but solely to the possibility of horizontal integration of the results of the subsidiaries themselves, all of those subsidiaries being resident in Luxembourg. Accordingly, the fact that the non-resident parent company is not subject to the fiscal sovereignty of the Grand Duchy of Luxembourg is irrelevant. |
| --- | --- |

27

In this regard, it should be observed, first of all, that it is apparent from the request for a preliminary ruling that the main proceedings do not relate to the possibility of a non-resident parent company being included in the Luxembourg tax integration scheme in the same way as its resident subsidiaries, but solely to the possibility of horizontal integration of the results of the subsidiaries themselves, all of those subsidiaries being resident in Luxembourg. Accordingly, the fact that the non-resident parent company is not subject to the fiscal sovereignty of the Grand Duchy of Luxembourg is irrelevant.

| 28 | Furthermore, it is admittedly true that, in a purely internal situation, tax integration between the subsidiaries of a parent company is impossible without the participation of the parent company. Nonetheless, where horizontal integration between the resident subsidiaries of a resident parent company is not permitted, consolidation of the results of those subsidiaries can nevertheless be achieved, as observed in paragraph 25 of this judgment, by means of the integration of those results into the result of the parent company. |
| --- | --- |

28

Furthermore, it is admittedly true that, in a purely internal situation, tax integration between the subsidiaries of a parent company is impossible without the participation of the parent company. Nonetheless, where horizontal integration between the resident subsidiaries of a resident parent company is not permitted, consolidation of the results of those subsidiaries can nevertheless be achieved, as observed in paragraph 25 of this judgment, by means of the integration of those results into the result of the parent company.

| 29 | With regard to subsidiaries of a non-resident parent company, however, consolidation of the subsidiaries’ results is not possible either by means of vertical tax integration or by means of horizontal tax integration. |
| --- | --- |

29

With regard to subsidiaries of a non-resident parent company, however, consolidation of the subsidiaries’ results is not possible either by means of vertical tax integration or by means of horizontal tax integration.

| 30 | Finally, it is apparent from the case-law of the Court that, since the second sentence of the first paragraph of Article 49 TFUE expressly leaves economic operators free to choose the appropriate legal form in which to pursue their activities in another Member State, that freedom of choice must not be limited by discriminatory tax provisions (see, to that effect, judgments of 28 January 1986, Commission v France, 270/83, EU:C:1986:37, paragraph 22; of 6 September 2012, Philips Electronics UK, C‐18/11, EU:C:2012:532, paragraph 13, and of 17 May 2017, X, C‐68/15, EU:C:2017:379, paragraph 40 and the case-law cited). The argument that the non-resident parent company could have achieved tax integration of the results of its resident subsidiaries by creating, in Luxembourg, a permanent establishment or intermediate subsidiary taking on the role of parent company of the existing subsidiaries, is accordingly irrelevant. |
| --- | --- |

30

Finally, it is apparent from the case-law of the Court that, since the second sentence of the first paragraph of Article 49 TFUE expressly leaves economic operators free to choose the appropriate legal form in which to pursue their activities in another Member State, that freedom of choice must not be limited by discriminatory tax provisions (see, to that effect, judgments of 28 January 1986, Commission v France, 270/83, EU:C:1986:37, paragraph 22; of 6 September 2012, Philips Electronics UK, C‐18/11, EU:C:2012:532, paragraph 13, and of 17 May 2017, X, C‐68/15, EU:C:2017:379, paragraph 40 and the case-law cited). The argument that the non-resident parent company could have achieved tax integration of the results of its resident subsidiaries by creating, in Luxembourg, a permanent establishment or intermediate subsidiary taking on the role of parent company of the existing subsidiaries, is accordingly irrelevant.

| 31 | Inasmuch as, from a taxation perspective, they place cross-border situations at a disadvantage in comparison with purely domestic situations, the provisions of the LIR at issue in the main proceedings thus constitute a restriction which is, in principle, prohibited by the provisions of the Treaty relating to freedom of establishment (see, by analogy, judgments of 27 November 2008, Papillon, C‐418/07, EU:C:2008:659, paragraph 32, and of 12 June 2014, SCA Group Holding and Others, C‐39/13 to C‐41/13, EU:C:2014:1758, paragraph 48). |
| --- | --- |

31

Inasmuch as, from a taxation perspective, they place cross-border situations at a disadvantage in comparison with purely domestic situations, the provisions of the LIR at issue in the main proceedings thus constitute a restriction which is, in principle, prohibited by the provisions of the Treaty relating to freedom of establishment (see, by analogy, judgments of 27 November 2008, Papillon, C‐418/07, EU:C:2008:659, paragraph 32, and of 12 June 2014, SCA Group Holding and Others, C‐39/13 to C‐41/13, EU:C:2014:1758, paragraph 48).

| 32 | Such a restriction may be permissible only if it relates to situations which are not objectively comparable or if it is justified by an overriding reason in the public interest that is proportionate to that objective (see, to that effect, judgments of 17 July 2014, Nordea Bank Danmark, C‐48/13, EU:C:2014:2087, paragraph 23, and of 12 June 2018, Bevola and Jens W. Trock, C‐650/16, EU:C:2018:424, paragraph 20). |
| --- | --- |

32

Such a restriction may be permissible only if it relates to situations which are not objectively comparable or if it is justified by an overriding reason in the public interest that is proportionate to that objective (see, to that effect, judgments of 17 July 2014, Nordea Bank Danmark, C‐48/13, EU:C:2014:2087, paragraph 23, and of 12 June 2018, Bevola and Jens W. Trock, C‐650/16, EU:C:2018:424, paragraph 20).

| 33 | In that regard, according to the case-law of the Court, the comparability of a cross-border situation with an internal situation must be examined having regard to the objective pursued by the national provisions at issue (see, to that effect, judgments of 18 July 2007, Oy AA, C‐231/05, EU:C:2007:439, paragraph 38; of 25 February 2010, X Holding, C‐337/08, EU:C:2010:89, paragraph 22; of 12 June 2014, SCA Group Holding and Others, C‐39/13 to C‐41/13, EU:C:2014:1758, paragraph 28, and of 12 June 2018, Bevola and Jens W. Trock, C‐650/16, EU:C:2018:424, paragraph 32). |
| --- | --- |

33

In that regard, according to the case-law of the Court, the comparability of a cross-border situation with an internal situation must be examined having regard to the objective pursued by the national provisions at issue (see, to that effect, judgments of 18 July 2007, Oy AA, C‐231/05, EU:C:2007:439, paragraph 38; of 25 February 2010, X Holding, C‐337/08, EU:C:2010:89, paragraph 22; of 12 June 2014, SCA Group Holding and Others, C‐39/13 to C‐41/13, EU:C:2014:1758, paragraph 28, and of 12 June 2018, Bevola and Jens W. Trock, C‐650/16, EU:C:2018:424, paragraph 32).

| 34 | The difference in treatment between parent companies having their seat in Luxembourg and parent companies having their seat in another Member State and not possessing a permanent establishment in Luxembourg, as regards the possibility of consolidating the results of their subsidiaries in Luxembourg, does relate to objectively comparable situations. |
| --- | --- |

34

The difference in treatment between parent companies having their seat in Luxembourg and parent companies having their seat in another Member State and not possessing a permanent establishment in Luxembourg, as regards the possibility of consolidating the results of their subsidiaries in Luxembourg, does relate to objectively comparable situations.

| 35 | As is apparent from the request for a preliminary ruling, the tax integration scheme established by Article 164a of the LIR has been laid down for reasons of tax neutrality, in order to allow consolidated taxation of some or all of the group companies. |
| --- | --- |

35

As is apparent from the request for a preliminary ruling, the tax integration scheme established by Article 164a of the LIR has been laid down for reasons of tax neutrality, in order to allow consolidated taxation of some or all of the group companies.

| 36 | That objective can, however, be achieved, as regards the consolidation of the results of subsidiaries established in Luxembourg and their taxation in that Member State, both by groups the parent company of which is established in Luxembourg and by groups the parent company of which is not established in Luxembourg (see, by analogy, judgment of 12 June 2014, SCA Group Holding and Others, C‐39/13 to C‐41/13, EU:C:2014:1758, paragraph 51). |
| --- | --- |

36

That objective can, however, be achieved, as regards the consolidation of the results of subsidiaries established in Luxembourg and their taxation in that Member State, both by groups the parent company of which is established in Luxembourg and by groups the parent company of which is not established in Luxembourg (see, by analogy, judgment of 12 June 2014, SCA Group Holding and Others, C‐39/13 to C‐41/13, EU:C:2014:1758, paragraph 51).

| 37 | Finally, neither the referring court nor the Luxembourg Government has set out reasons of public interest capable of justifying, as the case may be, the difference in treatment arising from the tax integration scheme at issue in the main proceedings. |
| --- | --- |

37

Finally, neither the referring court nor the Luxembourg Government has set out reasons of public interest capable of justifying, as the case may be, the difference in treatment arising from the tax integration scheme at issue in the main proceedings.

| 38 | In those circumstances, the answer to the first question is that Articles 49 and 54 TFEU must be interpreted as precluding legislation of a Member State which, while permitting vertical tax integration between a resident parent company, or a permanent establishment, in that Member State, of a non-resident parent company, and its resident subsidiaries, does not permit horizontal tax integration between resident subsidiaries of a non-resident parent company. |
| --- | --- |

38

In those circumstances, the answer to the first question is that Articles 49 and 54 TFEU must be interpreted as precluding legislation of a Member State which, while permitting vertical tax integration between a resident parent company, or a permanent establishment, in that Member State, of a non-resident parent company, and its resident subsidiaries, does not permit horizontal tax integration between resident subsidiaries of a non-resident parent company.

The second question

The second question

| 39 | By its second question, the referring court essentially asks whether Articles 49 and 54 TFEU must be interpreted as precluding legislation of a Member State which has the effect of requiring a parent company having its seat in another Member State to dissolve an existing vertical tax integration arrangement between one of its immediate subsidiaries and a number of more remote subsidiaries (all resident companies) in order for the immediate subsidiary to achieve horizontal tax integration with other resident subsidiaries of the parent company, even though the resident integrating subsidiary remains the same and the dissolution of the existing vertical tax integration arrangement before the end of the minimum period of integration, as laid down by national legislation, will lead to corrective individual taxation of the companies in question. |
| --- | --- |

39

By its second question, the referring court essentially asks whether Articles 49 and 54 TFEU must be interpreted as precluding legislation of a Member State which has the effect of requiring a parent company having its seat in another Member State to dissolve an existing vertical tax integration arrangement between one of its immediate subsidiaries and a number of more remote subsidiaries (all resident companies) in order for the immediate subsidiary to achieve horizontal tax integration with other resident subsidiaries of the parent company, even though the resident integrating subsidiary remains the same and the dissolution of the existing vertical tax integration arrangement before the end of the minimum period of integration, as laid down by national legislation, will lead to corrective individual taxation of the companies in question.

| 40 | In that regard, it should first be observed that, as the referring court states in its request for a preliminary ruling, the horizontal integration scheme introduced by Article 164a of the LIR, as amended, is designed as an alternative integration scheme to the vertical integration scheme, with the result that the two schemes are mutually exclusive and switching from one scheme to the other leads to the end of the pre-existing fiscally integrated group. |
| --- | --- |

40

In that regard, it should first be observed that, as the referring court states in its request for a preliminary ruling, the horizontal integration scheme introduced by Article 164a of the LIR, as amended, is designed as an alternative integration scheme to the vertical integration scheme, with the result that the two schemes are mutually exclusive and switching from one scheme to the other leads to the end of the pre-existing fiscally integrated group.

| 41 | Furthermore, and again according to the referring court, even though Article 164a of the LIR, as amended, cannot be applied retroactively to the tax years at issue in the main proceedings, Article 164a of the LIR, as applicable to those tax years, should nonetheless be interpreted with regard to the separate nature of the vertical and horizontal tax integration schemes, which means that any pre-existing vertical tax integration arrangement must be brought to an end before a horizontally integrated tax group can be formed. The dissolution of an integrated tax group before the end of the minimum period of integration, which is fixed by Article 164a(4) of the LIR at five operating years, results in corrective individual taxation of all the companies which have not observed that minimum period. That corrective individual taxation relates to years in respect of which it is no longer possible to consolidate results. |
| --- | --- |

41

Furthermore, and again according to the referring court, even though Article 164a of the LIR, as amended, cannot be applied retroactively to the tax years at issue in the main proceedings, Article 164a of the LIR, as applicable to those tax years, should nonetheless be interpreted with regard to the separate nature of the vertical and horizontal tax integration schemes, which means that any pre-existing vertical tax integration arrangement must be brought to an end before a horizontally integrated tax group can be formed. The dissolution of an integrated tax group before the end of the minimum period of integration, which is fixed by Article 164a(4) of the LIR at five operating years, results in corrective individual taxation of all the companies which have not observed that minimum period. That corrective individual taxation relates to years in respect of which it is no longer possible to consolidate results.

| 42 | Finally, it is apparent from the request for a preliminary ruling that, in accordance with the national legislation at issue in the main proceedings, as regards a group made up of a parent company having its seat in Luxembourg and resident subsidiaries, a resident subsidiary can join a pre-existing integrated tax group and leave at the end of the minimum period of five operating years, such that, at the level of the integrated subsidiaries, it is not the case that every change in the composition of the integrated tax group leads to the dissolution of the previous integrated tax group and the creation of a new group. |
| --- | --- |

42

Finally, it is apparent from the request for a preliminary ruling that, in accordance with the national legislation at issue in the main proceedings, as regards a group made up of a parent company having its seat in Luxembourg and resident subsidiaries, a resident subsidiary can join a pre-existing integrated tax group and leave at the end of the minimum period of five operating years, such that, at the level of the integrated subsidiaries, it is not the case that every change in the composition of the integrated tax group leads to the dissolution of the previous integrated tax group and the creation of a new group.

| 43 | It follows from the foregoing that a parent company having its seat in Luxembourg is free to decide to bring a resident subsidiary into a pre-existing integrated tax group and to remove it after a minimum period of five years, with the result that that subsidiary becomes subject to individual taxation once again, without either of those steps leading to the dissolution of the former integrated group and the creation of a new group. |
| --- | --- |

43

It follows from the foregoing that a parent company having its seat in Luxembourg is free to decide to bring a resident subsidiary into a pre-existing integrated tax group and to remove it after a minimum period of five years, with the result that that subsidiary becomes subject to individual taxation once again, without either of those steps leading to the dissolution of the former integrated group and the creation of a new group.

| 44 | By contrast, the separate nature of the vertical and horizontal tax integration schemes, as described by the referring court, has the consequence that a parent company which has its seat in another Member State, and which does not possess a permanent establishment in Luxembourg, will be able to bring about the integration of its resident immediate subsidiaries only at the cost of dissolution of an existing vertical integration arrangement between one of those subsidiaries and a number of its more remote resident subsidiaries. Where the integration arrangement between the immediate resident subsidiary and the more remote resident subsidiaries has not been in place, as regards some or all of the companies concerned, for the entirety of the minimum period of five years laid down by the national legislation at issue in the main proceedings, the dissolution of the existing integration leads to corrective taxation of the companies concerned. |
| --- | --- |

44

By contrast, the separate nature of the vertical and horizontal tax integration schemes, as described by the referring court, has the consequence that a parent company which has its seat in another Member State, and which does not possess a permanent establishment in Luxembourg, will be able to bring about the integration of its resident immediate subsidiaries only at the cost of dissolution of an existing vertical integration arrangement between one of those subsidiaries and a number of its more remote resident subsidiaries. Where the integration arrangement between the immediate resident subsidiary and the more remote resident subsidiaries has not been in place, as regards some or all of the companies concerned, for the entirety of the minimum period of five years laid down by the national legislation at issue in the main proceedings, the dissolution of the existing integration leads to corrective taxation of the companies concerned.

| 45 | The possibility of bringing a subsidiary into a pre-existing integrated tax group, without causing the former integrated group to be dissolved and a new group to be created, constitutes a tax advantage for the companies concerned. |
| --- | --- |

45

The possibility of bringing a subsidiary into a pre-existing integrated tax group, without causing the former integrated group to be dissolved and a new group to be created, constitutes a tax advantage for the companies concerned.

| 46 | Consequently, in the circumstances of the present case, a parent company having its seat in a Member State other than the Grand Duchy of Luxembourg is, as a result of its being obliged to dissolve an existing integrated group before it can achieve horizontal tax integration of its resident subsidiaries, subject to treatment which is disadvantageous in comparison with a parent company having its seat in that Member State. |
| --- | --- |

46

Consequently, in the circumstances of the present case, a parent company having its seat in a Member State other than the Grand Duchy of Luxembourg is, as a result of its being obliged to dissolve an existing integrated group before it can achieve horizontal tax integration of its resident subsidiaries, subject to treatment which is disadvantageous in comparison with a parent company having its seat in that Member State.

| 47 | Contrary to the argument put forward by the Luxembourg Government in its written observations, it is irrelevant in this regard that, in a purely internal situation, no company can belong simultaneously to two integrated groups. |
| --- | --- |

47

Contrary to the argument put forward by the Luxembourg Government in its written observations, it is irrelevant in this regard that, in a purely internal situation, no company can belong simultaneously to two integrated groups.

| 48 | As has been observed in paragraphs 25, 28 and 43 of this judgment, a parent company having its seat in Luxembourg can nevertheless achieve consolidation of the results of one subsidiary with those of its other resident subsidiaries, by bringing that subsidiary into the existing vertical integrated tax group. Accordingly, in a purely internal situation, the issue of simultaneous existence of two integrated groups does not arise, and it is solely the non-resident parent company that is confronted with the obligation to dissolve the former pre-existing integrated group in order to achieve consolidation of the results of its resident subsidiaries. |
| --- | --- |

48

As has been observed in paragraphs 25, 28 and 43 of this judgment, a parent company having its seat in Luxembourg can nevertheless achieve consolidation of the results of one subsidiary with those of its other resident subsidiaries, by bringing that subsidiary into the existing vertical integrated tax group. Accordingly, in a purely internal situation, the issue of simultaneous existence of two integrated groups does not arise, and it is solely the non-resident parent company that is confronted with the obligation to dissolve the former pre-existing integrated group in order to achieve consolidation of the results of its resident subsidiaries.

| 49 | Accordingly, the fact that a non-resident parent company not possessing a permanent establishment in Luxembourg must, in order to achieve horizontal integration between its resident subsidiaries, pay the price of dissolution of an existing vertical integration arrangement between one of its immediate resident subsidiaries and a number of its more remote resident subsidiaries, creates a disadvantage in cross-border situations as compared with purely internal situations. Such a de facto obligation constitutes a restriction which is, in principle, prohibited by the Treaty provisions relating to freedom of establishment, as referred to in the case-law cited in paragraph 31 of this judgment. |
| --- | --- |

49

Accordingly, the fact that a non-resident parent company not possessing a permanent establishment in Luxembourg must, in order to achieve horizontal integration between its resident subsidiaries, pay the price of dissolution of an existing vertical integration arrangement between one of its immediate resident subsidiaries and a number of its more remote resident subsidiaries, creates a disadvantage in cross-border situations as compared with purely internal situations. Such a de facto obligation constitutes a restriction which is, in principle, prohibited by the Treaty provisions relating to freedom of establishment, as referred to in the case-law cited in paragraph 31 of this judgment.

| 50 | In accordance with the case-law cited in paragraph 32 of this judgment, such a restriction may be permissible only if it relates to situations which are not objectively comparable or if it is justified by an overriding reason in the public interest that is proportionate to that objective. |
| --- | --- |

50

In accordance with the case-law cited in paragraph 32 of this judgment, such a restriction may be permissible only if it relates to situations which are not objectively comparable or if it is justified by an overriding reason in the public interest that is proportionate to that objective.

| 51 | The Luxembourg Government submits that a situation in which a parent company having its seat in Luxembourg brings a resident subsidiary into a vertically integrated tax group is not comparable, within the meaning of the case-law of the Court referred to in paragraph 33 of this judgment, to a situation in which a subsidiary of a company having its seat in another Member State wishes to form an integrated tax group with another subsidiary, arguing that a subsidiary could be brought into the vertically integrated tax group only if the parent company directly or indirectly held at least 95% of the shares in the subsidiary, whereas a subsidiary wishing to form an integrated tax group with another subsidiary does not have a 95% holding in that subsidiary. |
| --- | --- |

51

The Luxembourg Government submits that a situation in which a parent company having its seat in Luxembourg brings a resident subsidiary into a vertically integrated tax group is not comparable, within the meaning of the case-law of the Court referred to in paragraph 33 of this judgment, to a situation in which a subsidiary of a company having its seat in another Member State wishes to form an integrated tax group with another subsidiary, arguing that a subsidiary could be brought into the vertically integrated tax group only if the parent company directly or indirectly held at least 95% of the shares in the subsidiary, whereas a subsidiary wishing to form an integrated tax group with another subsidiary does not have a 95% holding in that subsidiary.

| 52 | Given, however, that, as is apparent from paragraph 35 of this judgment, the objective of consolidated taxation of some or all of the companies in a group can be achieved, as regards consolidation of the results of subsidiaries resident in Luxembourg and their taxation in that Member State, both by groups the parent company of which is established in that Member State and by groups the parent company of which is not, it must be observed that, where the parent company established in another Member State directly or indirectly holds at least 95% of the shares in the resident subsidiaries wishing to consolidate their results, the difference in treatment cannot be justified on the basis of objectively different situations. |
| --- | --- |

52

Given, however, that, as is apparent from paragraph 35 of this judgment, the objective of consolidated taxation of some or all of the companies in a group can be achieved, as regards consolidation of the results of subsidiaries resident in Luxembourg and their taxation in that Member State, both by groups the parent company of which is established in that Member State and by groups the parent company of which is not, it must be observed that, where the parent company established in another Member State directly or indirectly holds at least 95% of the shares in the resident subsidiaries wishing to consolidate their results, the difference in treatment cannot be justified on the basis of objectively different situations.

| 53 | Moreover, neither the referring court nor the Luxembourg Government has put forward any overriding reason in the public interest justifying such a restriction. |
| --- | --- |

53

Moreover, neither the referring court nor the Luxembourg Government has put forward any overriding reason in the public interest justifying such a restriction.

| 54 | In the light of the foregoing, the answer to the second question is that Articles 49 and 54 TFEU must be interpreted as precluding legislation of a Member State which has the effect of requiring a parent company having its seat in another Member State to dissolve an existing vertical tax integration arrangement between one of its immediate subsidiaries and a number of more remote subsidiaries (all resident companies) in order to enable that immediate subsidiary to achieve horizontal tax integration with other resident subsidiaries of the parent company, even though the resident integrating subsidiary remains the same and the dissolution of the existing vertical integration arrangement before the end of the minimum period of integration, as laid down by national legislation, will lead to corrective individual taxation of the companies in question. |
| --- | --- |

54

In the light of the foregoing, the answer to the second question is that Articles 49 and 54 TFEU must be interpreted as precluding legislation of a Member State which has the effect of requiring a parent company having its seat in another Member State to dissolve an existing vertical tax integration arrangement between one of its immediate subsidiaries and a number of more remote subsidiaries (all resident companies) in order to enable that immediate subsidiary to achieve horizontal tax integration with other resident subsidiaries of the parent company, even though the resident integrating subsidiary remains the same and the dissolution of the existing vertical integration arrangement before the end of the minimum period of integration, as laid down by national legislation, will lead to corrective individual taxation of the companies in question.

The third question

The third question

| 55 | By its third question, the referring court asks, essentially, whether Articles 49 and 54 TFEU and the principle of effectiveness of EU law must be interpreted as precluding legislation of a Member State, concerning a tax integration scheme, which requires any request for admission to the scheme to be made to the competent authority before the end of the first tax year in respect of which the application of that scheme is sought. |
| --- | --- |

55

By its third question, the referring court asks, essentially, whether Articles 49 and 54 TFEU and the principle of effectiveness of EU law must be interpreted as precluding legislation of a Member State, concerning a tax integration scheme, which requires any request for admission to the scheme to be made to the competent authority before the end of the first tax year in respect of which the application of that scheme is sought.

| 56 | The referring court states, in the request for a preliminary ruling, that Article 164a(4) of the LIR does not lay down a peremptory time limit as regards the taxpayer’s action, either in relation to the pre-litigation or to the litigation procedure, or a limitation period retroactively limiting the admissibility of such an action, but seeks to lay down a procedural framework for admission to the tax integration scheme. It states that the objective of that provision is to make it possible to establish, at the appropriate time, that the competent tax office acknowledges that the tax integration scheme is applicable to the group of companies defined in the request, the appropriate time being before all the companies concerned draw up their company accounts for the first year of application of the integration scheme, and the related tax returns. |
| --- | --- |

56

The referring court states, in the request for a preliminary ruling, that Article 164a(4) of the LIR does not lay down a peremptory time limit as regards the taxpayer’s action, either in relation to the pre-litigation or to the litigation procedure, or a limitation period retroactively limiting the admissibility of such an action, but seeks to lay down a procedural framework for admission to the tax integration scheme. It states that the objective of that provision is to make it possible to establish, at the appropriate time, that the competent tax office acknowledges that the tax integration scheme is applicable to the group of companies defined in the request, the appropriate time being before all the companies concerned draw up their company accounts for the first year of application of the integration scheme, and the related tax returns.

| 57 | In the present case, the third question is posed against the background that, as the referring court explains, as regards the 2013 tax year, administrative and judicial practice in Luxembourg reflected the view that the national legislation excluding horizontal tax integration limited to the subsidiaries of a parent company having its seat in another Member State was compatible with EU law. |
| --- | --- |

57

In the present case, the third question is posed against the background that, as the referring court explains, as regards the 2013 tax year, administrative and judicial practice in Luxembourg reflected the view that the national legislation excluding horizontal tax integration limited to the subsidiaries of a parent company having its seat in another Member State was compatible with EU law.

| 58 | B, C and D submit in this regard that the late submission of their request for horizontal tax integration in respect of the 2013 tax year was justified by the fact that, until delivery of the judgment of 12 June 2014, SCA Group Holding and Others (C‐39/13 to C‐41/13, EU:C:2014:1758), administrative and judicial practice in Luxembourg stood in the way of such a request. They submit that they nonetheless made their request promptly after delivery of that judgment, at a point in time when there was a genuine chance of it being granted, and before expiry of the general limitation period of five years which is laid down by Luxembourg law. |
| --- | --- |

58

B, C and D submit in this regard that the late submission of their request for horizontal tax integration in respect of the 2013 tax year was justified by the fact that, until delivery of the judgment of 12 June 2014, SCA Group Holding and Others (C‐39/13 to C‐41/13, EU:C:2014:1758), administrative and judicial practice in Luxembourg stood in the way of such a request. They submit that they nonetheless made their request promptly after delivery of that judgment, at a point in time when there was a genuine chance of it being granted, and before expiry of the general limitation period of five years which is laid down by Luxembourg law.

| 59 | In this regard, it follows from the answers given to the first and second questions that Articles 49 and 54 TFEU must be interpreted as precluding legislation of a Member State which, while permitting vertical tax integration between a resident parent company, or a permanent establishment, in that Member State, of a non-resident parent company, and its resident subsidiaries, does not permit horizontal tax integration limited to the resident subsidiaries of a non-resident parent company. |
| --- | --- |

59

In this regard, it follows from the answers given to the first and second questions that Articles 49 and 54 TFEU must be interpreted as precluding legislation of a Member State which, while permitting vertical tax integration between a resident parent company, or a permanent establishment, in that Member State, of a non-resident parent company, and its resident subsidiaries, does not permit horizontal tax integration limited to the resident subsidiaries of a non-resident parent company.

| 60 | According to settled case-law of the Court, the interpretation which, in the exercise of the jurisdiction conferred on it by Article 267 TFEU, the Court gives to a rule of EU law clarifies and defines the meaning and scope of that rule as it must be or ought to have been understood and applied from the time of its entry into force. It follows that the rule as thus interpreted may, and must, be applied by the courts even to legal relationships which arose and were established before the judgment ruling on the request for interpretation, provided that in other respects the conditions for bringing a dispute relating to the application of that rule before the competent courts are satisfied (see, inter alia, judgment of 6 March 2007, Meilicke and Others, C‐292/04, EU:C:2007:132, paragraph 34 and the case-law cited). |
| --- | --- |

60

According to settled case-law of the Court, the interpretation which, in the exercise of the jurisdiction conferred on it by Article 267 TFEU, the Court gives to a rule of EU law clarifies and defines the meaning and scope of that rule as it must be or ought to have been understood and applied from the time of its entry into force. It follows that the rule as thus interpreted may, and must, be applied by the courts even to legal relationships which arose and were established before the judgment ruling on the request for interpretation, provided that in other respects the conditions for bringing a dispute relating to the application of that rule before the competent courts are satisfied (see, inter alia, judgment of 6 March 2007, Meilicke and Others, C‐292/04, EU:C:2007:132, paragraph 34 and the case-law cited).

| 61 | In the dispute in the main proceedings, the formal requirement that the request for admission to the tax integration scheme must be made before the end of the first tax year in respect of which application of that scheme is requested was not satisfied in respect of the 2013 tax year. |
| --- | --- |

61

In the dispute in the main proceedings, the formal requirement that the request for admission to the tax integration scheme must be made before the end of the first tax year in respect of which application of that scheme is requested was not satisfied in respect of the 2013 tax year.

| 62 | In that regard, even though the referring court does not characterise that time limit as peremptory, it is nevertheless clear from the file submitted to the Court that the failure to comply with it led the tribunal administratif (Administrative Court) to dismiss the action brought against the rejection of the request for integration in respect of the 2013 tax year. |
| --- | --- |

62

In that regard, even though the referring court does not characterise that time limit as peremptory, it is nevertheless clear from the file submitted to the Court that the failure to comply with it led the tribunal administratif (Administrative Court) to dismiss the action brought against the rejection of the request for integration in respect of the 2013 tax year.

| 63 | Accordingly, the question whether non-compliance with the time limit for submitting the request for tax integration is a matter which can be raised in opposition to the applicants in the main proceedings, in circumstances such as those of the main proceedings, must be examined with reference, by analogy, to the principles of equivalence and effectiveness applicable to applications intended to ensure the exercise of a right which an individual derives from EU law (see, to that effect, judgment of 21 December 2016, TDC, C‐327/15, EU:C:2016:974, paragraphs 89 to 91) and to actions for safeguarding such a right (see, to that effect, inter alia, judgment of 24 October 2018, XC and Others, C‐234/17, EU:C:2018:853, paragraph 22 and the case-law cited). |
| --- | --- |

63

Accordingly, the question whether non-compliance with the time limit for submitting the request for tax integration is a matter which can be raised in opposition to the applicants in the main proceedings, in circumstances such as those of the main proceedings, must be examined with reference, by analogy, to the principles of equivalence and effectiveness applicable to applications intended to ensure the exercise of a right which an individual derives from EU law (see, to that effect, judgment of 21 December 2016, TDC, C‐327/15, EU:C:2016:974, paragraphs 89 to 91) and to actions for safeguarding such a right (see, to that effect, inter alia, judgment of 24 October 2018, XC and Others, C‐234/17, EU:C:2018:853, paragraph 22 and the case-law cited).

| 64 | As regards the principle of equivalence, it does not appear from the file submitted to the Court that the time limit for making the request for tax integration laid down in Article 164a(4) of the LIR does not comply with that principle. |
| --- | --- |

64

As regards the principle of equivalence, it does not appear from the file submitted to the Court that the time limit for making the request for tax integration laid down in Article 164a(4) of the LIR does not comply with that principle.

| 65 | As regards the principle of effectiveness, it must be borne in mind that the Member States are responsible for ensuring that the rights conferred by EU law are effectively protected in each case and that that principle requires, in particular, that the tax authorities of the Member States do not render practically impossible or excessively difficult the exercise of rights conferred by EU law (judgment of 20 December 2017, Caterpillar Financial Services, C‐500/16, EU:C:2017:996, paragraph 41). |
| --- | --- |

65

As regards the principle of effectiveness, it must be borne in mind that the Member States are responsible for ensuring that the rights conferred by EU law are effectively protected in each case and that that principle requires, in particular, that the tax authorities of the Member States do not render practically impossible or excessively difficult the exercise of rights conferred by EU law (judgment of 20 December 2017, Caterpillar Financial Services, C‐500/16, EU:C:2017:996, paragraph 41).

| 66 | In accordance with settled case-law of the Court, every case in which the question arises as to whether a national procedural provision renders the application of EU law impossible or excessively difficult must be analysed by reference to the role of that provision in the procedure, its conduct and its special features, viewed as a whole, before the various national bodies. In that context, it is necessary, inter alia, to take into consideration, where relevant, the principle of the rights of the defence, the principle of legal certainty and the proper conduct of the procedure (judgments of 22 February 2018, INEOS Köln, C‐572/16, EU:C:2018:100, paragraph 44, and of 24 October 2018, XC and Others, C‐234/17, EU:C:2018:853, paragraph 49). |
| --- | --- |

66

In accordance with settled case-law of the Court, every case in which the question arises as to whether a national procedural provision renders the application of EU law impossible or excessively difficult must be analysed by reference to the role of that provision in the procedure, its conduct and its special features, viewed as a whole, before the various national bodies. In that context, it is necessary, inter alia, to take into consideration, where relevant, the principle of the rights of the defence, the principle of legal certainty and the proper conduct of the procedure (judgments of 22 February 2018, INEOS Köln, C‐572/16, EU:C:2018:100, paragraph 44, and of 24 October 2018, XC and Others, C‐234/17, EU:C:2018:853, paragraph 49).

| 67 | The Court has also stated that it is compatible with EU law to lay down reasonable time limits for bringing proceedings, in the interests of legal certainty, which protects both the taxpayer and the authorities concerned. Such periods are not by their nature such as to make it virtually impossible or excessively difficult to exercise the rights conferred by EU law, even if the expiry of those periods necessarily entails the dismissal, in whole or in part, of the action brought (judgment of 8 September 2011, Q-Beef and Bosschaert, C‐89/10 and C‐96/10, EU:C:2011:555, paragraph 36 and the case-law cited). It is settled case-law of the Court that the fact that the Court may have ruled that the breach of EU law has occurred generally does not affect the starting point of the limitation period (judgment of 8 September 2011, Q-Beef and Bosschaert, C‐89/10 and C‐96/10, EU:C:2011:555, paragraph 47 and the case-law cited). |
| --- | --- |

67

The Court has also stated that it is compatible with EU law to lay down reasonable time limits for bringing proceedings, in the interests of legal certainty, which protects both the taxpayer and the authorities concerned. Such periods are not by their nature such as to make it virtually impossible or excessively difficult to exercise the rights conferred by EU law, even if the expiry of those periods necessarily entails the dismissal, in whole or in part, of the action brought (judgment of 8 September 2011, Q-Beef and Bosschaert, C‐89/10 and C‐96/10, EU:C:2011:555, paragraph 36 and the case-law cited). It is settled case-law of the Court that the fact that the Court may have ruled that the breach of EU law has occurred generally does not affect the starting point of the limitation period (judgment of 8 September 2011, Q-Beef and Bosschaert, C‐89/10 and C‐96/10, EU:C:2011:555, paragraph 47 and the case-law cited).

| 68 | EU law does not preclude a national authority from relying on the expiry of a reasonable limitation period unless the conduct of the national authorities combined with the existence of a limitation period result in a person being totally deprived of the opportunity to enforce the rights which he enjoys under EU law before the national courts (see, to that effect, judgments of 15 April 2010, Barth, C‐542/08, EU:C:2010:193, paragraph 33, and of 8 September 2011, Q-Beef and Bosschaert, C‐89/10 and C‐96/10, EU:C:2011:555, paragraph 51). |
| --- | --- |

68

EU law does not preclude a national authority from relying on the expiry of a reasonable limitation period unless the conduct of the national authorities combined with the existence of a limitation period result in a person being totally deprived of the opportunity to enforce the rights which he enjoys under EU law before the national courts (see, to that effect, judgments of 15 April 2010, Barth, C‐542/08, EU:C:2010:193, paragraph 33, and of 8 September 2011, Q-Beef and Bosschaert, C‐89/10 and C‐96/10, EU:C:2011:555, paragraph 51).

| 69 | It is true that, as regards the utilisation of available legal remedies in order to establish the liability of a Member State for a breach of EU law, the Court has held that it would be contrary to the principle of effectiveness to oblige injured parties to have recourse systematically to all the legal remedies available to them even if that would give rise to excessive difficulties or could not reasonably be required of them (judgments of 24 March 2009, Danske Slagterier, C‐445/06, EU:C:2009:178, paragraph 62, and of 25 November 2010, Fuß, C‐429/09, EU:C:2010:717, paragraph 77). |
| --- | --- |

69

It is true that, as regards the utilisation of available legal remedies in order to establish the liability of a Member State for a breach of EU law, the Court has held that it would be contrary to the principle of effectiveness to oblige injured parties to have recourse systematically to all the legal remedies available to them even if that would give rise to excessive difficulties or could not reasonably be required of them (judgments of 24 March 2009, Danske Slagterier, C‐445/06, EU:C:2009:178, paragraph 62, and of 25 November 2010, Fuß, C‐429/09, EU:C:2010:717, paragraph 77).

| 70 | Thus, in paragraphs 104 to 106 of its judgment of 8 March 2001, Metallgesellschaft and Others (C‐397/98 and C‐410/98, EU:C:2001:134), the Court held that the exercise of rights conferred on private persons by directly applicable provisions of EU law would be rendered impossible or excessively difficult if their claims for compensation based on EU law were rejected or reduced solely because the persons concerned had not applied for the benefit of the right which was conferred by EU provisions, and which national law denied them, with a view to challenging the refusal of the Member State by means of the legal remedies provided for that purpose and invoking the primacy and direct effect of EU law. In a case of that kind, it would not have been reasonable to require the injured parties to utilise the legal remedies available to them, since they would in any event have had to make the payment at issue in the cases giving rise to that judgment in advance, and even if the national court had held that the fact that payment had to be made in advance was incompatible with EU law, the persons in question would not have been able to obtain reimbursement of that sum and they would have laid themselves open to the possibility of incurring a penalty. |
| --- | --- |

70

Thus, in paragraphs 104 to 106 of its judgment of 8 March 2001, Metallgesellschaft and Others (C‐397/98 and C‐410/98, EU:C:2001:134), the Court held that the exercise of rights conferred on private persons by directly applicable provisions of EU law would be rendered impossible or excessively difficult if their claims for compensation based on EU law were rejected or reduced solely because the persons concerned had not applied for the benefit of the right which was conferred by EU provisions, and which national law denied them, with a view to challenging the refusal of the Member State by means of the legal remedies provided for that purpose and invoking the primacy and direct effect of EU law. In a case of that kind, it would not have been reasonable to require the injured parties to utilise the legal remedies available to them, since they would in any event have had to make the payment at issue in the cases giving rise to that judgment in advance, and even if the national court had held that the fact that payment had to be made in advance was incompatible with EU law, the persons in question would not have been able to obtain reimbursement of that sum and they would have laid themselves open to the possibility of incurring a penalty.

| 71 | However, while the legislation at issue in the main proceedings, together with Luxembourg administrative practice and Luxembourg case-law, did not, as regards the tax year 2013, allow for horizontal tax integration of the subsidiaries (and only the subsidiaries) of a given parent company, the submission of a request for integration did not involve the applicants in the main proceedings in taking financial and legal risks analogous to those at issue in, for example, the cases giving rise to the judgments of 8 March 2001, Metallgesellschaft and Others (C‐397/98 and C‐410/98, EU:C:2001:134, paragraph 104), and of 25 November 2010, Fuß (C‐429/09, EU:C:2010:717, paragraph 81), but, on the contrary, could reasonably be required of them. |
| --- | --- |

71

However, while the legislation at issue in the main proceedings, together with Luxembourg administrative practice and Luxembourg case-law, did not, as regards the tax year 2013, allow for horizontal tax integration of the subsidiaries (and only the subsidiaries) of a given parent company, the submission of a request for integration did not involve the applicants in the main proceedings in taking financial and legal risks analogous to those at issue in, for example, the cases giving rise to the judgments of 8 March 2001, Metallgesellschaft and Others (C‐397/98 and C‐410/98, EU:C:2001:134, paragraph 104), and of 25 November 2010, Fuß (C‐429/09, EU:C:2010:717, paragraph 81), but, on the contrary, could reasonably be required of them.

| 72 | On the facts of the present case, as regards the tax year 2013, it was open to the applicants in the main proceedings to make a request for horizontal tax integration at any time during that year, on the basis that Luxembourg legislation was incompatible with EU law. As is apparent from the file submitted to the Court, they did in fact make such a request, on the basis of EU law, as regards the 2014 tax year, before Luxembourg law was amended so as to permit such integration. |
| --- | --- |

72

On the facts of the present case, as regards the tax year 2013, it was open to the applicants in the main proceedings to make a request for horizontal tax integration at any time during that year, on the basis that Luxembourg legislation was incompatible with EU law. As is apparent from the file submitted to the Court, they did in fact make such a request, on the basis of EU law, as regards the 2014 tax year, before Luxembourg law was amended so as to permit such integration.

| 73 | The fact that, in the light of the national legislation and of domestic administrative practice and case-law, the applicants in the main proceedings considered that any such request would be unsuccessful does not mean either that it was objectively impossible to make such a request, within the meaning of the case-law of the Court referred to in paragraph 68 of this judgment, or that the situation was such that the taking of that step would have given rise to excessive difficulties, or could not reasonably be required of them, within the meaning of the case-law referred to in paragraph 69 of this judgment. |
| --- | --- |

73

The fact that, in the light of the national legislation and of domestic administrative practice and case-law, the applicants in the main proceedings considered that any such request would be unsuccessful does not mean either that it was objectively impossible to make such a request, within the meaning of the case-law of the Court referred to in paragraph 68 of this judgment, or that the situation was such that the taking of that step would have given rise to excessive difficulties, or could not reasonably be required of them, within the meaning of the case-law referred to in paragraph 69 of this judgment.

| 74 | In the light of the foregoing, the answer to the third question is that the principles of equivalence and effectiveness must be interpreted as not precluding legislation of a Member State concerning a tax integration scheme which requires any request for admission to such a scheme to be made to the competent authority before the end of the first tax year in respect of which the application of that scheme is sought. |
| --- | --- |

74

In the light of the foregoing, the answer to the third question is that the principles of equivalence and effectiveness must be interpreted as not precluding legislation of a Member State concerning a tax integration scheme which requires any request for admission to such a scheme to be made to the competent authority before the end of the first tax year in respect of which the application of that scheme is sought.

Costs

Costs

| 75 | Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. |
| --- | --- |

75

Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

| | On those grounds, the Court (Second Chamber) hereby rules: |
| --- | --- |

On those grounds, the Court (Second Chamber) hereby rules:

| | 1. | Articles 49 and 54 TFEU must be interpreted as precluding legislation of a Member State which, while permitting vertical tax integration between a resident parent company, or a permanent establishment, in that Member State, of a non-resident parent company, and its resident subsidiaries, does not permit horizontal tax integration between resident subsidiaries of a non-resident parent company. |
| --- | --- | --- |

1.

1.

Articles 49 and 54 TFEU must be interpreted as precluding legislation of a Member State which, while permitting vertical tax integration between a resident parent company, or a permanent establishment, in that Member State, of a non-resident parent company, and its resident subsidiaries, does not permit horizontal tax integration between resident subsidiaries of a non-resident parent company.

Articles 49 and 54 TFEU must be interpreted as precluding legislation of a Member State which, while permitting vertical tax integration between a resident parent company, or a permanent establishment, in that Member State, of a non-resident parent company, and its resident subsidiaries, does not permit horizontal tax integration between resident subsidiaries of a non-resident parent company.

| | 2. | Articles 49 and 54 TFEU must be interpreted as precluding legislation of a Member State which has the effect of requiring a parent company having its seat in another Member State to dissolve an existing vertical tax integration arrangement between one of its immediate subsidiaries and a number of more remote subsidiaries (all resident companies) in order to enable that immediate subsidiary to achieve horizontal tax integration with other resident subsidiaries of the parent company, even though the resident integrating subsidiary remains the same and the dissolution of the existing vertical tax integration arrangement before the end of the minimum period of integration, as laid down by national legislation, will lead to corrective individual taxation of the companies in question. |
| --- | --- | --- |

2.

2.

Articles 49 and 54 TFEU must be interpreted as precluding legislation of a Member State which has the effect of requiring a parent company having its seat in another Member State to dissolve an existing vertical tax integration arrangement between one of its immediate subsidiaries and a number of more remote subsidiaries (all resident companies) in order to enable that immediate subsidiary to achieve horizontal tax integration with other resident subsidiaries of the parent company, even though the resident integrating subsidiary remains the same and the dissolution of the existing vertical tax integration arrangement before the end of the minimum period of integration, as laid down by national legislation, will lead to corrective individual taxation of the companies in question.

Articles 49 and 54 TFEU must be interpreted as precluding legislation of a Member State which has the effect of requiring a parent company having its seat in another Member State to dissolve an existing vertical tax integration arrangement between one of its immediate subsidiaries and a number of more remote subsidiaries (all resident companies) in order to enable that immediate subsidiary to achieve horizontal tax integration with other resident subsidiaries of the parent company, even though the resident integrating subsidiary remains the same and the dissolution of the existing vertical tax integration arrangement before the end of the minimum period of integration, as laid down by national legislation, will lead to corrective individual taxation of the companies in question.

| | 3. | The principles of equivalence and effectiveness must be interpreted as not precluding legislation of a Member State concerning a tax integration scheme which requires any request for admission to such a scheme to be made to the competent authority before the end of the first tax year in respect of which the application of that scheme is sought. |
| --- | --- | --- |

3.

3.

The principles of equivalence and effectiveness must be interpreted as not precluding legislation of a Member State concerning a tax integration scheme which requires any request for admission to such a scheme to be made to the competent authority before the end of the first tax year in respect of which the application of that scheme is sought.

The principles of equivalence and effectiveness must be interpreted as not precluding legislation of a Member State concerning a tax integration scheme which requires any request for admission to such a scheme to be made to the competent authority before the end of the first tax year in respect of which the application of that scheme is sought.

| | [Signatures] |
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[Signatures]

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(
  *1
  )	Language of the case: French.

*1