Judgment;Summary — ECLI:EU:C:2020:370
Date: 2020-05-14
Language of the case: French
Court formation: Second Chamber
Subject matter: Right of establishment
Procedure: Reference for a preliminary ruling
Origin: Luxembourg

Summary C-749/18 — 1 
Case C-749/18 
Summary of the request for a preliminary ruling pursuant to Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged: 
30 November 2018 
Referring court: 
Cour administrative (Luxembourg) 
Date of the decision to refer: 
29 November 2018 
Appellants, respondants to the cross-appeal: 
public limited company B 
public limited company C 
limited liability company D 
Respondent, appellant in the cross-appeal: 
Administration des contributions directes 
  
I. Subject matter and circumstances of the dispute 
1 A (formerly AA), a public limited liability company governed by French law, set 
up a subsidiary in the Grand Duchy of Luxembourg, B, which itself has seven 
subsidiaries ‘liable to tax in Luxembourg’ (‘resident subsidiaries’), in each of 
which it holds, more than 95% of the capital. B and its seven subsidiaries opted 
for the Luxembourg tax integration scheme, under which tax is calculated on the 
consolidated profits of the group of companies. 
2 C and D are also resident companies, subsidiaries of the public limited liability 
company governed by French law A. B has no holding in either of those two 
companies. By separate letters of 8 December 2014, B, C and D applied for 
admission to the tax integration scheme as from 1 January 2013 (first letter) and as 
from 1 January 2014 (second letter). 
EN 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING - CASE C-749/18 
 
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3 The companies relied in particular on the judgment of 12 June 2014, SCA Group 
holding and Others, C-39/13 to C-41/13, EU:2014:1758 (see below; ‘the 
judgment in SCA Group Holding’). 
4 By decision of 3 February 2015, the administration des Contributions directes 
(Direct Taxation Authorities) stated that the tax integration scheme was devised 
solely for a parent company (vertical integration) that is a resident for tax 
purposes (in Luxembourg).  It therefore refused the request on the ground that that 
condition was not satisfied, as B had no holding in the companies to be integrated. 
B, C and D seised the tribunal adminitratif (Administrative Court).  
5 In the meantime, a law of 18 December 2015 altered the tax integration scheme by 
extending it in essence to groups formed solely of subsidiaries (horizontal 
integration). The law expressly states that a company forming part of an integrated 
group cannot at the same time be part of another integrated group. That new legal 
scheme applies only as from the 2015 tax year.  
6 By judgment of 6 December 2017, the Administrative Court dismissed the action 
for the 2013 tax year on the ground that the request, dated 8 December 2014, had 
not been made within the prescribed time limit, that is to say, before the end of the 
2013 tax year. As regards the 2014 tax year, the Administrative Court found that it 
was contrary to the terms of Articles 49 and 54 TFEU to deny the opportunity of 
applying the tax integration scheme on the ground that the applicant companies 
are not owned by a parent company which is a resident or has a permanent 
establishment in the Grand Duchy of Luxembourg. 
7 The appellants brought an action before the Cour Administrative (Higher 
Administrative Court) on 15 January 2018. The State then cross-appealed the 
Administrative Court’s decision to uphold the claim for the 2014 tax year. 
II. The provisions at issue 
A. EU law  
8 Chapter 2 TFEU, entitled ‘Right of establishment’, includes the following two 
provisions: 
Аrticle 49 
‘Within the framework of the provisions set out below, restrictions on the freedom 
of establishment of nationals of a Member State in the territory of another 
Member State shall be prohibited. Such prohibition shall also apply to restrictions 
on the setting-up of agencies, branches or subsidiaries by nationals of any 
Member State established in the territory of any Member State. 
Freedom of establishment shall include the right to take up and pursue activities as 
self-employed persons and to set up and manage undertakings, in particular 
B AND OTHERS 
 
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companies or firms within the meaning of the second paragraph of Article 54, 
under the conditions laid down for its own nationals by the law of the country 
where such establishment is effected, subject to the provisions of the Chapter 
relating to capital.’ 
Аrticle 54 
‘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 Union shall, for the purposes of this Chapter, be treated in the same 
way as natural persons who are nationals of Member States. 
“Companies or firms” means companies or firms constituted under civil or 
commercial law, including cooperative societies, and other legal persons governed 
by public or private law, save for those which are non-profit-making.’ 
B. National law 
Luxembourg law regarding income tax  
9 Article 164a provided:  
‘1. Resident capital companies …, of which at least 95% of the capital is held ... 
by another resident capital company ... or by a [Luxembourgish] permanent 
establishment of a non-resident capital company ..., may, upon request, be fiscally 
integrated into the parent company or into the [Luxembourgish] permanent 
establishment, in order to aggregate their respective taxable income with that of 
the parent company or [Luxembourgish] permanent establishment. ... 
4. To join the tax integration scheme, a joint written request shall be made by 
the parent company or the [Luxembourgish] permanent establishment and by the 
subsidiaries concerned. The request shall be submitted to the Administration des 
contributions directes (Direct Taxation Authorities) 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 ...’ 
10 The Law of  8 December 2015 replaced Article 164a of the Law regarding income 
tax as follows: 
‘(1) For the purposes of the present article, the following definitions shall apply: 
... 
5. “integrated group”: either a group composed of the integrating parent company 
and the integrated company(ies) …, or a group composed of the integrating 
subsidiary company and the integrated company(ies)... . A member of an 
integrated group cannot at the same time be part of another integrated group. ...’ 
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Article 7 specifies: ‘The present law shall enter into force with effect from the 
2015 tax year’. 
III. Submissions of the parties 
A. Companies B, C and D 
11 The appellants complain that the Administrative Court decided that the request for 
admission to the tax integration scheme for the 2013 tax year should have been 
made before the end of the 2013 tax year. They take the view that the alleged 
obligation upon the companies concerned to submit their request for horizontal tax 
integration before the end of the 2013 tax year amounts to imposing an excessive 
and disproportionate burden upon them, in the light of the principle of 
effectiveness of EU law. 
12 The appellants rely on the judgment in SCA Group Holding. They point out the 
similarities between the Dutch scheme at issue in the cases which led to that 
judgment and the Luxembourg tax integration scheme which existed before the 
amendment made by the Law of 8 December 2015, in particular insofar as both 
schemes preclude horizontal tax integration. They observe that the judgment of 
the Court of Justice is of general application and that the interpretation given to 
the provisions of EU law has not only a prospective effect, but also an ex tunc 
effect, so that the court will apply it even to legal relationships which arose before 
the judgment, by disapplying any provision of national law which may conflict 
with EU law. 
13 Given that the tax integration scheme which prevailed until the 2015 tax year is 
contrary to EU law, the appellants argue that reparation should be made for the 
unlawful consequences of that scheme and that it would be contrary to the 
principle of effectiveness of EU law to deny them the benefit of tax integration as 
from 1 January 2013 under the pretext that a purely formal condition, namely 
observance of the time limit within which the request must be submitted, has not 
been satisfied, inasmuch it is virtually impossible to satisfy such a condition, 
having regard to the administrative and judicial positions adopted by Luxembourg 
in 2013. 
B.  The State 
14 The State contends that the judgment should be upheld, insofar as it rejected the 
application relating to the 2013 tax year. 
15 On the other hand, it complains that the Administrative Court accepted the 
application for the 2014 tax year.  
16 It first of all takes the view that the law in force at the material time did not 
envisage horizontal tax integration between subsidiary companies within the same 
B AND OTHERS 
 
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group. It is only following the Law of 18 December 2015 that the scheme was 
altered to permit horizontal tax integration as from the 2015 tax year.  
17 In addition, the State points out that, even with a retroactive application of the 
Law of 18 December 2015, the fact remains that that law provides that ‘a member 
of an integrated group cannot at the same time be part of another integrated 
group’. According to the State, switching from classic vertical integration to 
horizontal integration implies withdrawal from the existing group and, 
subsequently, results in a new fiscally integrated group. The group parent 
company, which holds a central and decisive role in this respect, should as a 
consequence be replaced by another group parent company, which would 
thereafter be the pillar of the newly created group, which was not done in the 
present case. 
IV. Findings of the Higher Administrative Court 
A. First question referred 
18 The Luxembourg tax integration scheme is defined as a ‘special scheme for 
taxation of the consolidated profits of a group of companies’ provided for tax 
neutrality purposes. It allows a group of companies to combine their taxable 
income in the integrating company so that the consolidated taxable income is 
levied only on the integrating company. 
19 In the present case, the application seeks to have C and D included in the tax 
integration scheme, with B as integrating company. As it is common ground that 
the latter is not the parent company of the first two companies, but like those 
companies, a subsidiary of the company governed by French law, A, which is 
resident in France and the parent company of the group, the appellants’ 
application seeks the creation of a horizontally fiscally integrated group between 
subsidiaries of a non-resident parent company having no permanent establishment 
in the Grand Duchy of Luxembourg. 
20 Luxembourg law did not, at the material time, allow such integration.  
21 The Administrative Court correctly referred to the judgment in SCA Group 
Holding concerning the Dutch tax regime in respect of a request made by three 
companies which had their seat in the Netherlands seeking to combine them in a 
single tax entity, those companies being held by a company which had its seat in 
Germany. The Administrative Court inferred from this that, in the same way as 
the Dutch law at issue, prohibiting a non-resident parent company, established in a 
Member State of the European Union, from forming a tax entity between its 
resident subsidiaries, as is apparent from the Luxembourg legislation in question 
before it was amended by the Law of 18 December 2015, would be contrary to EU 
law, in particular to Articles 49 and 54 TFEU. 
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22 The Higher Administrative Court considers therefore that, having regard to the 
Court of Justice’s analysis of the Dutch tax entity regime in its judgment of 12 
June 2014, there are serious doubts as to whether the Luxembourgish legislation, 
before it was altered by the Law of 18 December 2015, is consistent with the 
freedom of establishment enshrined in Articles 49 and 54 TFEU. 
B. The second question referred 
23 It is true that the Law of 18 December 2015 altered the tax integration scheme by 
introducing, alongside the pre-existing tax integration scheme providing for 
vertical integration between a resident integrating parent company or its 
permanent Luxembourgish establishment and its resident subsidiaries or sub-
subsidiaries, the tax integration scheme providing for horizontal integration 
between an integrating subsidiary company and other subsidiaries of a non-
integrating parent company, whether or not resident. 
24 On the other hand, that overall change was applicable only ‘as from the 2015 tax 
year’. In accordance with the principle of non-retroactivity of the law, the Higher 
Administrative Court considers that those changes cannot be applied beyond the 
date for which retroactive provision was formally made, to previous tax years, that 
is, in the present case, to the 2013 and 2014 tax years. 
25 The Higher Administrative Court is of the opinion that the vertical and horizontal 
tax integration schemes are structures which are mutually exclusive, so that the 
combination of both schemes in one fiscally integrated group is not permissible 
and that switching from one scheme to the other leads to the end of the pre-
existing fiscally integrated group. 
26 It follows that even if the answer to first question is in the affirmative, the fact 
remains that the Higher Administrative Court is led to consider that the pre-
existence of the vertically integrated group, within which B assumed the role of 
integrating parent company, precludes that company from becoming part of 
another horizontally integrated group by assuming the role of its integrating 
subsidiary. The Higher Administrative Court should therefore confirm the refusal 
to allow admission to the tax integration scheme on the ground that, as long as the 
vertically fiscally integrated group is not dissolved, the tax authorities are entitled 
to reject the appellants’ request seeking the formation of another horizontally 
fiscally integrated group which includes B. 
27 However, as the State itself concedes and the appellants also point out, dissolving 
the vertically fiscally integrated group would mean that five year minimum tax 
integration requirement was not met, which would result in the correction of the 
individual tax liabilities of those subsidiaries and of B. 
28 Furthermore, the appellants make the relevant argument that that solution would 
give rise to a new unjustified difference in treatment, to the detriment of non-
resident parent companies. Therefore, it would be possible for a purely 
B AND OTHERS 
 
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Luxembourgish group of companies to achieve vertical fiscal integration where 
the integrating entity is the ultimate parent company and the inclusion of another 
sister branch of other subsidiaries in the fiscally integrated group would be 
regarded not as the creation of a new group but as a simple alteration of the pre-
existing group. On the other hand, a group of companies of which the parent 
company is non-resident, and which, as in the present case, in order to achieve 
vertical fiscal integration in the Grand Duchy of Luxembourg, should have had 
recourse to an intermediate subsidiary to stand as the parent company of the 
Luxembourgish group, would be denied the right to add to the existing tax 
integration arrangement another sister branch of the subsidiary for the sole reason 
that the ultimate parent company is a non-resident company. 
29 In the light of the above, the Higher Administrative Court doubts whether the 
obligation to terminate a pre-existing vertical tax integration arrangement before 
being able to form a horizontal tax integration group is consistent with the 
freedom of establishment enshrined in Articles 49 and 54 TFEU. That court in 
uncertain whether freedom of establishment means that it is permissible to alter a 
pre-existing, vertically fiscally integrated group by adding sister companies of the 
Luxembourgish parent company and that the same fiscally integrated group 
should be regarded as continuing to exist as long as it is the same company which 
assumes the role of parent company, the question of whether that company 
changes, as a result of the addition of sister companies, its role as integrating 
parent company to that of integrating national subsidiary being irrelevant as long 
as it remains the integrating company at the level at which all the results of the 
fiscally integrated group are consolidated.  
C. Third question referred 
30 If the answers to the first two questions are in the affirmative, the Higher 
Administrative Court will be bound to give full effect to the right conferred on the 
appellants by the Court of Justice pursuant to Articles 49 and 54 TFEU to join the 
pre-existing fiscally integrated group and disapply the substantive conditions of 
the legislation which do not comply with EU law.  
31 The fact nonetheless remains that the appellants were still required to comply with 
the rules and requirements, in particular the statutory time limit within which the 
request must be submitted before the end of the current tax year. As regards the 
2014 tax year, the appellants complied with that time limit by submitting their 
request of 8 December 2014 before the end of the tax year, namely on 22 
December 2014. As regards the 2013 tax year, the Higher Administrative Court 
concurs with the Administrative Court in finding that the relevant request was 
received by the tax authorities outside the time limit. In fact, it was submitted on 
22 December 2014, although it should have reached the authorities before the end 
of the 2013 tax year. 
32 The Higher Administrative Court refers to the essential principles set out by the 
Court of Justice concerning reimbursement of taxes levied in a Member State in 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING - CASE C-749/18 
 
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breach of Community law, in particular in its judgment of 8 March 2001, 
Metallgesellschaft and Others, (C-397/98 and C-410/98, EU:C:2001:134). It 
observes, however, that that case-law of the Court of Justice governs questions 
relating to actions by taxable persons seeking recovery of taxes already 
established and paid, but the levying of which was subsequently found to be 
incompatible with EU law. 
33 The appellants nevertheless make the relevant argument that reparation for an 
infringement of EU law might even be made at a stage prior to the recovery of 
unlawfully levied taxes by allowing beforehand admission to a tax scheme which 
was originally more restrictive in scope, in breach of EU law, and that such a 
solution could easily be applied and would therefore be the most effective means 
of erasing the unlawful consequences of an infringement of EU law. 
V. Questions referred for a preliminary ruling 
34 The Administrative Court therefore refers the following three questions to the 
Court of Justice: 
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 allowing 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 
B AND OTHERS 
 
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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 
of 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? 
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 the [Court of Justice of the European 
Union] of 12 June 2014 (Joined Cases C-39/13, C-40/13 and C-41/13), 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 
the judgment of 12 June 2014; and 
– that request relates not only to the 2014 tax year still ongoing at the time that 
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?