Opinion of the Advocate General — ECLI:EU:C:2006:551
Date: 2006-09-12
Language of the case: Finnish
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Right of establishment;Free movement of capital
Procedure: Reference for a preliminary ruling
Origin: Finland

summary, it should be held that restricting the deductibility of intra-group transfers to transfers to Finnish companies is apt to safeguard the allocation of powers to impose taxes between Member States, to exclude the possibility that income which is transferred is not taxed, and to combat tax avoidance. It ensures that profits earned by group companies in Finland are subject to taxation there according to the principle of territoriality. 66. There remains to be considered whether the provision does not go beyond what is necessary and proportionate (within the narrower meaning of that term) to achieve these purposes. 67. If the only issues were to ensure that transferred income was taxed and to prevent tax avoidance, the general restriction on deductibility of intra-group transfers to transfers to Finnish companies would go too far. Specifically, these two purposes could also be achieved by a rule which was less restrictive of freedom of establishment. As already explained, one might make the deductibility for tax purposes of an intra-group transfer conditional on proof that the income was in fact taxed in the hands of the recipient company. 68. However, safeguarding the allocation of powers to impose taxes, which is directly connected to the other two grounds of justification, could not be achieved by a corresponding, less restrictive national provision. A rule which required the State in which the transferor company was resident to allow a deduction provided that the transferee was taxed would not preclude a transfer of the power to impose taxes. 69. Weighing up the various interests, it also appears that a provision such as is laid down by the Finnish Law on Intra-group Financial Transfers is proportionate within the narrower meaning of that term. 70. In Marks & Spencer, (37) the Court regarded it as disproportionate not to recognise a cross-border transfer of losses in a particular, exceptional situation which arose in that case, namely where the non‑resident subsidiary had exhausted all possibilities of utilising its losses and the losses could not be taken into account in the future either. In those circumstances the interest in safeguarding the allocation of powers to impose taxes was outweighed by freedom of establishment, and the transfer of losses to the non-resident parent company had to be allowed. 71. However, on the information the reference for a preliminary ruling gives as to the facts, it does not appear that Oy AA is in an exceptional situation corresponding to that in Marks & Spencer. It follows that there is no cause to consider whether, by way of exception, the principle of proportionality requires a divergence from the allocation of powers to impose taxes. C – Free movement of capital 72. The provisions on intra-group transfers could be assessed by reference to free movement of capital as guaranteed by Articles 56 and 58 EC, in parallel to freedom of establishment. However, apart from its territorial and temporal scope of application, which are not material in the present case, the same principles apply as apply in the context of freedom of establishment. It follows that restrictions on free movement of capital inherent in the provisions relating to intra-group transfers are likewise justified in order to safeguard the allocation of powers to impose taxes between Member States. V – Conclusion 73. On the basis of the foregoing considerations I suggest that the question from the Korkein hallinto-oikeus should be answered as follows: In the circumstances described in the reference for a preliminary ruling, Articles 43 EC and 48 EC, Articles 56 EC and 58 EC, and Council Directive 90/435/EEC on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States do not preclude a system such as that of the Finnish legislation on intra-group transfers in which a condition for the tax-deductibility of an intra-group transfer is that both the transferor and the transferee be companies resident in Finland. 1 – Original language: German. 2 – Case C‑446/03 [2005] ECR I‑10837. 3 – Council Directive 90/435/EEC of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (OJ 1990 L 255, p. 6), as amended by Council Directive 2003/123/EC of 22 December 2003 amending Directive 90/435/EEC (OJ 2004 L 7, p. 41). 4 – At their request the companies have been granted anonymity. 5 – Marks & Spencer (cited above, footnote 2), paragraph 29; Cases C‑397/98 and C‑410/98 Metallgesellschaft and Others [2001] ECR I‑1727, paragraph 37; Case C‑319/02 Manninen [2004] ECR I‑7477, paragraph 19; and Case C‑470/04 N [2006] ECR I‑7409, point 33. 6 – Case C‑302/97 Konle [1999] ECR I‑3099, paragraph 22. 7 – Case C‑265/04 [2006] ECR I‑923, at point 71. See also the Opinion of Advocate General Alber in Case C‑251/98 Baars [2000] ECR I‑2787, point 12 ff., with further references, and the Opinion of Advocate General Geelhoed in Case C‑524/04 Test Claimants in the Thin Cap Group Litigation [2007] ECR I‑00000, point 35. 8 – See for example the ‘golden shares’ cases, namely Case C‑367/98 Commission v Portugal [2002] ECR I‑4731, Case C‑483/99 Commission v France [2002] ECR I‑4781, and Case C‑503/99 Commission v Belgium [2002] ECR I‑4809, as well as Case C‑463/00 Commission v Spain [2003] ECR I‑4581 and Case C‑98/01 Commission v United Kingdom [2003] ECR I‑4641. See also the Opinion of Advocate General Poiares Maduro in Joined Cases C‑282/04 and C‑283/04 Commission v Netherlands [2006] ECR I‑9141, point 41. 9 – See Baars (cited above, footnote 7), Case C‑436/00 X and Y [2002] ECR I‑10829, and Case C‑471/04 Keller Holding [2006] ECR I‑2107. 10 – X and Y (cited above, footnote 9), paragraphs 37 and 66. See also the Opinion of Advocate General Léger in Case C‑196/04 Cadbury Schweppes and Cadbury Schweppes Overseas [2006] ECR I‑7995, paragraph 32. 11 – To similar effect, see the Opinion of Advocate General Alber in Baars (cited above, footnote 7), points 32 to 34, who thinks the distinction should be according to which fundamental freedom is directly affected and which is indirectly affected. In his Opinion in Test Claimants in the Thin Cap Group Litigation (cited above, footnote 7), point 35, Advocate General Geelhoed took the same approach. 12 – See Case C‑264/96 ICI v Colmer [1996] ECR I‑4695, paragraph 20; Case C‑307/97 Saint-Gobain ZN [1999] ECR I‑6161, paragraph 34; Marks & Spencer (cited above, footnote 2), paragraph 30; and Keller Holding (cited above, footnote 9), paragraph 29. 13 – Case C‑55/94 Gebhard [1995] ECR I‑4165, paragraph 37; Case C‑19/92 Kraus [1993] ECR I‑1663, paragraph 32; and Case C‑140/03 Commission v Greece [2005] ECR I‑3177, paragraph 27. 14 – Marks & Spencer (cited above, footnote 2), paragraph 37, under reference to Case 270/83 Commission v France [1986] ECR 273, paragraph 18 – ‘avoir fiscal’. 15 – Case C‑403/03 [2005] ECR I‑6421. 16 – Schempp (cited above, footnote 15), paragraph 32. 17 – Marks & Spencer (cited above, footnote 2), paragraph 35; Case C‑250/95 Futura Participations and Singer [1997] ECR I‑2471, paragraph 26; Case C‑9/02 De Lasteyrie du Saillant [2004] ECR I‑2409, paragraph 49; and N (cited above, footnote 5), paragraph 40. 18 – Case C‑204/90 Bachmann [1992] ECR I‑249, paragraph 28, and Case C‑300/90 Commission v Belgium [1992] ECR I‑305, paragraph 21. See also Manninen (cited above, footnote 5), paragraph 42, and Keller Holding (cited above, footnote 9), paragraph 40. 19 – Case C‑484/93 Svensson and Gustavsson [1995] ECR I‑3955, paragraph 18, and ICI (cited above, footnote 12), paragraph 29. See also Manninen (cited above, footnote 5), paragraph 42, and Keller Holding (cited above, footnote 9), paragraph 40. 20 – I criticised the previous case-law on this point in my Opinion in Manninen (cited above, footnote 5), paragraphs 53 ff. 21 – This assessment is shared by Advocate General Geelhoed in his Opinion in Test Claimants in the Thin Cap Group Litigation (cited above, footnote 7), point 88. 22 – To this effect see Manninen (cited above, footnote 5), paragraphs 45 and 46, and Keller Holding (cited above, footnote 9), paragraphs 41 to 43. 23 – Opinion in Marks & Spencer (cited above, footnote 2), paragraph 66. 24 – In his Opinion in Test Claimants in the Thin Cap Group Litigation (cited above, footnote 7), point 89, Advocate General Geelhoed correctly emphasised that in considering cohesion the Court has not expressly referred to the fundamental principles of non-discrimination. 25 – De Lasteyrie du Saillant (cited above, footnote 17), paragraph 67, and Manninen (cited above, footnote 5), paragraph 43, and the Opinion of Advocate General Poiares Maduro in Marks & Spencer (cited above, footnote 2), point 72. 26 – Manninen (cited above, footnote 5), paragraph 49, and Marks & Spencer (cited above, footnote 2), paragraph 44. 27 – Marks & Spencer (cited above, footnote 2), paragraph 51. 28 – See above, point 15. 29 – See Case C‑336/96 Gilly [1998] ECR I‑2793, paragraphs 24 and 30; Case C‑385/00 De Groot [2002] ECR I‑11819, paragraph 93; Case C‑376/03 D [2005] ECR I‑5821, paragraphs 50 and 51; Case C‑513/03 van Hilten-van der Heijden [2006] ECR I‑1957, paragraph 47; and N (cited above, footnote 5), paragraphs 43 and 44. 30 – Futura Participations and Singer (cited above, footnote 17), paragraph 22; van Hilten van der Heijden (cited above, footnote 29), paragraph 48; and N (cited above, footnote 5), paragraph 45. 31 – Marks & Spencer (cited above, footnote 2), paragraph 39. As regards allocation according to the worldwide income and source state principles, see the Opinion of Advocate General Geelhoed in Case C‑374/04 Test Claimants in Class IV of the ACT Group Litigation [2006] ECR I‑11637, points 49 to 51. 32 – Marks & Spencer (cited above, footnote 2), paragraph 46. 33 – Once-only taxation can be achieved by two States acting with reference to one another, for example by the application of the imputation method. 34 – See below, paragraph 67. 35 – As regards the questions of taxation on migration arising in this context, see the recent judgment in N (cited above, footnote 5). 36 – Manninen (cited above, footnote 5), paragraph 49, and Marks & Spencer (cited above, footnote 2), paragraph 44. 37 – Marks & Spencer (cited above, footnote 2), paragraphs 53 to 56.