Opinion of the Advocate General — ECLI:EU:C:2014:104
Date: 2014-02-27
Language of the case: Dutch
Subject matter: Right of establishment
Procedure: Reference for a preliminary ruling
Origin: Netherlands

Summary — Judgment of the Court (Second Chamber), 12 June 2014 1. Freedom of establishment — Tax legislation or Fiscal legislation — Corporation tax — National legislation excluding the possibility of benefiting from a group taxation regime for resident parent companies which own their resident sub-subsidiaries via an intermediate non-resident subsidiary — Not permissible — Justification — Need to ensure the cohesion of the tax system — Not justified (Arts 49 TFEU and 54 TFEU) 2. Freedom of establishment — Tax legislation or Fiscal legislation — Corporation tax — National legislation excluding the possibility of benefiting from a group taxation regime for resident sister companies which own their resident subsidiaries which have a common non-resident parent company — Not permissible — Justification — Need to ensure the cohesion of the tax system — Not justified (Arts 49 TFEU and 54 TFEU) 1. Articles 49 TFEU and 54 TFEU must be interpreted as precluding legislation of a Member State under which a resident parent company can form a single tax entity with a resident sub-subsidiary where it holds that sub-subsidiary through one or more resident companies, but cannot where it holds that sub-subsidiary through non-resident companies which do not have a permanent establishment in that Member State. The possibility granted by that law to resident companies constitutes a cash-flow advantage for the companies concerned. That scheme allows, in particular, the profits and losses of the companies constituting the tax entity to be consolidated at the level of the parent company and the transactions carried out within the group to remain neutral for tax purposes. The legislation accordingly creates a difference in treatment since the ability to elect for the tax entity regime is dependent on whether the parent company holds its indirect stakes through a subsidiary established in that State or in another Member State. Accordingly, inasmuch as, from a taxation perspective, they put cross-border situations at a disadvantage compared with domestic situations, the provisions of that legislation thus constitute a restriction which is, in principle, prohibited by the provisions of the TFEU relating to freedom of establishment. In that regard, in order for such a difference in treatment to be compatible with those provisions, it must either relate to situations which are not objectively comparable — in which case the comparability of a cross-border situation with an internal situation must be examined having regard to the aim pursued by the national provisions at issue — or be justified by an overriding reason in the public interest. As regards comparability, the national legislation aims to treat, as far as possible, a group constituted by a parent company with its subsidiaries and its sub-subsidiaries in the same way as an undertaking with a number of establishments, by enabling the results of all those companies to be consolidated for tax purposes. Holding resident sub-subsidiaries either through a resident subsidiary or a non-resident subsidiary are therefore objectively comparable to the extent that the benefit of the advantages of the tax entity regime is sought in both situations for the group formed by the parent company and the sub-subsidiaries. Furthermore, that restriction cannot be regarded as justified by an overriding reason in the public interest based on preserving the coherence of the tax system. Although the need to preserve the coherence of a tax system may justify a restriction on the exercise of the fundamental freedoms guaranteed by the Treaty, no direct link can be established between the granting of the tax advantage linked to the formation of a tax entity and the offsetting of that advantage by a particular tax. (see paras 21, 24, 27-29, 31, 33, 40, 41, 43, operative part 1) 2. Articles 49 TFEU and 54 TFEU must be interpreted as precluding legislation of a Member State under which treatment as a single tax entity is granted to a resident parent company which holds resident subsidiaries, but is precluded for resident sister companies the common parent company of which neither has its seat in that Member State nor has a permanent establishment there. That legislation creates a difference in treatment between, on the one hand, parent companies the seat of which is in that Member State, which thanks to the single tax entity regime may, inter alia, in order to determine their taxable profit, immediately set off the losses of their loss-making subsidiaries against the profits of their profit-making subsidiaries, and, on the other hand, parent companies which also own subsidiaries in that Member State but have their seat in another Member State and are without a permanent establishment in the first Member State, which are excluded from benefitting from the tax entity and, therefore, from the cash-flow advantage which the tax entity bestows. Accordingly, inasmuch as, from a taxation perspective, they put Community situations at a disadvantage compared with purely domestic situations, the provisions of that legislation thus constitute a restriction which is, in principle, prohibited by the provisions of the Treaty relating to the freedom of establishment. As regards comparability of a cross-border situation with an internal situation, the objective of the tax entity regime, which is to allow companies in the same group to be considered for tax purposes as if they constituted one and the same taxpayer, can be achieved both by groups the parent company of which is resident and by groups the parent company of which is not resident, at least so far as concerns the taxation of solely the sister companies which are taxable in that State. It follows that the difference of treatment, as regards the possibility of fiscally integrating sister companies, is therefore not justified by an objective difference of situation. Nor is it justified by an overriding reason in the public interest based on the coherence of the tax system, related to the prevention of the double use of losses, in the absence of any direct link between that advantage and a particular tax. (see paras 47, 48, 50-54, 56, operative part 2)