Opinion of the Advocate General — ECLI:EU:C:2012:488
Date: 2012-07-19
Language of the case: Finnish
Subject matter: Right of establishment;Taxation
Procedure: Reference for a preliminary ruling
Origin: Finland

Summary — Judgment of the Court (Fourth Chamber), 21 February 2013 Freedom of establishment — Tax legislation — Corporation tax — Tax relief — National legislation authorising the deduction of losses incurred by a resident subsidiary but excluding deduction for a non-resident subsidiary — Lawfulness — Conditions (Arts 49 TFEU and 54 TFEU) Articles 49 TFEU and 56 TFEU do not preclude national legislation under which a parent company merging with a subsidiary established in another Member State, which has ceased activity, cannot deduct from its taxable income the losses incurred by that subsidiary in respect of the tax years prior to the merger, while that national legislation allows such a possibility when the merger is with a resident subsidiary. Such legislation is none the less incompatible with EU law if it does not allow the parent company the possibility of showing that its non-resident subsidiary has exhausted the possibilities of taking those losses into account and that there is no possibility of their being taken into account in its State of residence in respect of future tax years either by itself or by a third party. The possibility granted by the law of a Member State to a resident parent company of taking a resident subsidiary’s losses into account when it merges with that subsidiary indeed constitutes a tax advantage for the parent company, while the exclusion of such an advantage in relations between a resident parent company and a subsidiary established in another Member State is liable to make establishment in the latter State less attractive and hence to deter the company from setting up subsidiaries there. Moreover, from the point of view of the aim of such legislation, the situation of a resident parent company which wishes to merge with a resident subsidiary and that of a resident parent company which wishes to carry out the same operation with a non-resident subsidiary are objectively comparable. However, first, such a difference of treatment is justified in so far as it pursues legitimate objectives compatible with the Treaty and related to overriding reasons in the public interest, such as the need to safeguard the allocation of powers of taxation between the Member States and to avert the risks of the double use of losses and tax avoidance. Secondly, such legislation is appropriate to ensuring the attainment of those objectives. However, it goes beyond what is necessary to attain the essential part of the objectives pursued in a situation in which the non-resident subsidiary has exhausted the possibilities available in its State of residence of having the losses taken into account. In any event, where the application of EU law means that a parent company resident in a Member State can take the losses of its non-resident subsidiary into account in connection with a merger, the rules for calculating the non-resident subsidiary’s losses for the purpose of their being taken over by the resident parent company must not constitute unequal treatment compared with the rules of calculation which would be applicable if the merger were with a resident subsidiary. (see paras 31, 32, 35, 40, 46, 49, 56, 61, operative part 1 and 2)