Opinion of the Advocate General — ECLI:EU:C:2009:721
Date: 2009-11-19
Language of the case: Dutch
Subject matter: Right of establishment
Procedure: Reference for a preliminary ruling
Origin: Netherlands

Summary of the Judgment Freedom of movement for persons – Freedom of establishment – Tax legislation – Corporation tax (Arts 43 EC and 48 EC) Articles 43 EC and 48 EC do not preclude legislation of a Member State which makes it possible for a parent company to form a single tax entity with its resident subsidiary, but which prevents the formation of such a single tax entity with a non-resident subsidiary, in that the profits of that non-resident subsidiary are not subject to the fiscal legislation of that Member State. The exclusion of such an advantage for a parent company which owns a subsidiary established in another Member State constitutes indeed a restriction on the freedom of establishment, since it is liable to render less attractive the exercise by that parent company of its freedom of establishment by deterring it from setting up subsidiaries in other Member States. In this respect, the situation of a resident parent company wishing to form a single tax entity with a resident subsidiary and the situation of a resident parent company wishing to form a single tax entity with a non-resident subsidiary are objectively comparable with regard to the objective of such a tax scheme, in so far as each seeks to benefit from the advantages of that scheme, which, in particular, allows the profits and losses of the companies constituting the single 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. However, such a tax scheme is justified in view of the need to safeguard the allocation of the power to impose taxes between the Member States. The parent company is at liberty to decide to form a tax entity with its subsidiary and, with equal liberty, to dissolve such an entity from one year to the next, the possibility of including a non-resident subsidiary in the single tax entity would be tantamount to granting the parent company the freedom to choose the tax scheme applicable to the losses of that subsidiary and the place where those losses are taken into account. Since the dimensions of the tax entity can therefore be altered, acceptance of the possibility of including a non-resident subsidiary in such an entity would have the consequence of allowing the parent company to choose freely the Member State in which the losses of that subsidiary are to be taken into account. As regards the proportionate nature of that tax scheme, the fact that a Member State decides to permit the temporary offsetting of losses incurred by a foreign permanent establishment at the place of the company’s registered office does not mean that that possibility must also be extended to non-resident subsidiaries of a resident parent company. Permanent establishments situated in another Member State and non-resident subsidiaries are not in a comparable situation with regard to the allocation of the power of taxation as provided for in an agreement for the avoidance of double taxation, since the subsidiary, as an independent legal person, is subject to unlimited tax liability in the State party to such an agreement in which that subsidiary is established, whereas the permanent establishment situated in another Member State remains in principle and in part subject to the fiscal jurisdiction of the Member State of origin. It is, admittedly, true that the second sentence of the first paragraph of Article 43 EC leaves traders free to choose the appropriate legal form in which to pursue their activities in another Member State and that freedom of choice must not be limited by discriminatory tax provisions. However, the Member State of origin remains at liberty to determine the conditions and level of taxation for different types of establishments chosen by national companies operating abroad, on condition that those companies are not treated in a manner that is discriminatory in comparison with comparable national establishments. As permanent establishments situated in another Member State and non-resident subsidiaries are not in a comparable situation with regard to the allocation of the power of taxation, the Member State of origin is not obliged to apply the same tax scheme to non-resident subsidiaries as that which it applies to foreign permanent establishments. Therefore, the tax scheme concerned must be regarded as being proportionate to the objectives which it pursues. (see paras 19, 24, 31-33, 37-40, 42-43, operative part)