OPINION OF ADVOCATE GENERAL
KOKOTT
delivered on 27 February 2014 (1)
Joined Cases C‑39/13 to C‑41/13
Inspecteur v an de Belastingdienst Noord/kantoor Groningen
v
SCA Group Holding BV (C‑39/13),
X AG,
X1 Holding GmbH,
X2 Holding GmbH,
X3 Holding BV,
D1 BV,
D2 BV,
D3 BV,
v
Inspecteur van de Belastingdienst Amsterdam (C‑40/13)
and
Inspecteur van de Belastingdienst Holland-Noord/kantoor Zaandam
v
MSA International Holdings BV,
MSA Nederland BV (C‑41/13)
(Requests for a preliminary ruling from the Gerechtshof te Amsterdam (Netherlands))
(Tax legislation — Freedom of establishment — National corporation tax — Group taxation regime (fiscale eenheid) — Groups including foreign companies)
I –  Introduction
1.        Once again proceedings before the Court concern taxation of groups of companies by the Member States and its compatibility with freedom of establishment. Although groups are composed of legally distinct companies, the Member States tend, in different ways, to treat them more or less as a single company for the purposes of taxation law. However, where a group is composed of companies from different Member States and is thus subject to more than one tax jurisdiction, treatment as a single company becomes problematic.
2.        The present requests for a preliminary ruling from the Netherlands are caught in the point of tension between two rulings, in Papillon (2) and in X Holding. (3) In X Holding the Court accepted that the Netherlands ‘tax entity’ group regime could exclude companies established in other Member States. In Papillon, on the other hand, the Court objected to the exclusion of a domestic sub-subsidiary from the French ‘tax integration’ regime where the intermediate subsidiary is established in another Member State.
3.        The referring court is now asking the Court again about the Netherlands tax entity regime. The three joined cases concern different group structures, although a common feature is that some companies in the group are established in another Member State. The lawfulness of excluding those companies from the tax entity is no longer called into question by the referring court. However, the Netherlands tax authority also prevents the companies in the group which are established in the Netherlands from combining in this way on the ground that without the non-resident companies there is no group at all in such cases.
4.        The referring court is thus now expecting two things of the Court. First, it wishes to know with which domestic situations such fragmentary groups are actually comparable under the Netherlands regime. Second, it must be clarified whether the various tax problems that would arise from recognition of a cross-border fragmentary tax entity could justify any restriction of freedom of establishment.
II –  Legislative framework
5.        Netherlands corporation tax law accords groups the possibility, under certain conditions, of forming a tax entity. In this regard, Article 15(1) of the Wet op de vennootschapsbelasting 1969 (‘the Law on corporation tax’), in the version applicable in the main proceedings, provides:
‘Where a taxable person (the parent company) holds, legally and economically, at least 95% of the shares in the nominal paid-up capital of another taxable person (the subsidiary) and where both taxable persons so request, tax shall be levied on them as if they were a single taxable person, with the activities and assets of the subsidiary forming part of the activities and assets of the parent company. Tax shall be levied on the parent company. In that case, the taxable persons are together regarded as a tax entity. More than one subsidiary may form part of a tax entity.’
6.        However, this is subject to the requirement that ‘both taxable persons are established in the Netherlands’ (Article 15(3)(c) of the Law on corporation tax). Article 15(4) of the Law on corporation tax lays down the following exception to this requirement:
‘… Furthermore, a taxable person which … is not established in the Netherlands but operates a business through a permanent establishment in the Netherlands may, under conditions defined by general administrative measure, form part of a tax entity …’
7.        With regard to this exception, Articles 32 to 35 of the Besluit fiscale eenheid 2003 (‘the Decree on tax entities’) contain provisions the effect of which is to permit the inclusion of the domestic permanent establishment of a non-resident company in a tax entity. Furthermore, they contain detailed rules on the relationship between the tax entity and the Netherlands rules on the participation exemption and on the prevention of the double use of losses.
III –  Main proceedings
8.        The cases stem from three sets of main proceedings whose facts can be summarised in two groups.
A –    Cases C‑39/13 and C‑41/13
9.        In the main proceedings in Cases C‑39/13 and C‑41/13, the Netherlands-resident companies SCA Group Holding BV and MSA International Holdings BV are seeking to form a tax entity together with some of their sub-subsidiaries, which are also established in the Netherlands. Their subsidiaries, however, through which they have a holding in those sub-subsidiaries and which are not to be included in the tax entity, are resident in Germany and also do not have a permanent establishment in the Netherlands. In the case of SCA Group Holding BV, sub-sub-subsidiaries are also involved to some extent, that is to say, it controls its holding in those companies across not just one, but two tiers of German intermediate companies.
10.      The Netherlands tax authority refused the applications on the ground that the intermediate subsidiaries are not established in the Netherlands. The Rechtbank Haarlem (District Court, Haarlem), before which the companies brought proceedings, considered the refusal to be a breach of freedom of establishment. The Netherlands tax authority is now appealing against that decision before the Gerechtshof te Amsterdam (Regional Court of Appeal, Amsterdam).
B –    Case C‑40/13
11.      In the main proceedings in Case C‑40/13 three sister companies established in the Netherlands, which belong directly or indirectly to a parent company established in Germany that does not have a permanent establishment in the Netherlands, applied to form a tax entity. The application relevant in the proceedings before the Court proposes only that those sister companies be included in the tax entity.
12.      In this case too, the Netherlands tax authority refused the application. As grounds, it stated that the applicants’ parent company is not established in the Netherlands. The Rechtbank Haarlem dismissed as unfounded the action brought by the companies. The companies are appealing against that decision before the Gerechtshof te Amsterdam.
IV –  Procedure before the Court
13.      The Gerechtshof te Amsterdam, which is hearing the main proceedings, has made three requests for a preliminary ruling to the Court pursuant to Article 267 TFEU. The questions referred are largely similar and can be summarised as follows:
‘(1)      Does denying the persons concerned the opportunity of having the Netherlands tax entity regime applied to the activities and the assets of the (sub-)sub-subsidiaries (Cases C‑39/13 and C‑41/13)/sister companies (Case C‑40/13) established in the Netherlands constitute a restriction of the freedom of establishment within the meaning of Article 43 EC in conjunction with Article 48 EC?
In that context, in the light of the objectives pursued by the Netherlands tax entity regime, is the situation of the (sub­)sub­subsidiaries or the sister companies in the main proceedings objectively comparable to
(Cases C‑39/13 and C‑41/13)
(i)      the situation of companies established in the Netherlands which are (sub-)subsidiaries of an intermediate holding company established in the Netherlands that has not elected to be integrated in a tax entity with its parent company established in the Netherlands, and which therefore, as sub-subsidiaries, similarly to the (sub-)sub­subsidiaries in the main proceedings, have no access to the tax entity regime with — exclusively — their grandparent company, or to
(ii)      the situation of sub-subsidiaries established in the Netherlands which, together with their intermediate holding company established in the Netherlands, have elected to form a tax entity with their grandparent company established in the Netherlands and whose activities and assets therefore, unlike those of the (sub-)sub-subsidiaries in the main proceedings, are consolidated for tax purposes?
(Case C‑40/13)
(i)      the situation of sister companies, established in the Netherlands, which have not elected to be integrated in a tax entity with their common parent company, established in the Netherlands, and which therefore, jointly as sister companies, similarly to the sister companies in the main proceedings, have no access to the tax entity regime, or to
(ii)      the situation of sister companies, established in the Netherlands, which, together with their parent company, established in the Netherlands, have elected to form a tax entity with their parent company and whose activities and assets therefore, in contrast to those of the sister companies in the main proceedings, are consolidated for tax purposes?
(2)      In answering the first sentence of Question 1, does it still make a difference whether
(Case C‑39/13)
the (sub-)sub-subsidiaries are held by one single intermediate holding company (at a higher level of the group structure) in the other Member State or whether, as in the case of the (sub­)sub­subsidiaries in the main proceedings, they are held by two (or more) intermediate holding companies, albeit situated in that other Member State (at two or more higher levels of the group structure)?
(Case C‑41/13)
the foreign intermediate holding company concerned, if it did not operate in the Netherlands through a subsidiary but through a permanent establishment, had been able to elect — as regards the assets and the activities of that Netherlands permanent establishment — to form a tax entity with its parent company established in the Netherlands?
(Case C‑40/13)
the sister companies have a common (direct) parent company in the other Member State or various (direct) parent companies in the other Member State, with the result that it is only at a higher level — albeit situated in that other Member State — of the group structure that there is a common (indirect) parent company of those various companies?
(3)      If and to the extent that the first sentence of Question 1 must be answered in the affirmative, can such a restriction then be justified by overriding reasons in the public interest, more particularly by the need to maintain fiscal coherence, including the prevention of unilateral and bilateral double use of losses?
(4)      If and to the extent that Question 3 must be answered in the affirmative, should such a restriction be considered to be proportionate?’
14.      In the proceedings before the Court, the applicants in the main proceedings, the Federal Republic of Germany, the Kingdom of the Netherlands and the Commission submitted written observations. They and the French Republic took part in the hearing.
V –  Legal assessment
15.      The complex questions referred for a preliminary ruling concern two quite clear situations. Cases C‑39/13 and C‑41/13 concern a group structure in which the intermediate subsidiaries are not established in the Netherlands but in another Member State. In Case C‑40/13, on the other hand, the group’s parent company is established in another Member State.
16.      By its questions the referring court is now essentially seeking to ascertain whether Netherlands law, which, in both these instances, precludes the formation of a tax entity between the Netherlands parent company and its Netherlands sub-subsidiaries or between the Netherlands sister companies, infringes freedom of establishment. It is not necessary to answer the question whether only Article 43 EC in conjunction with Article 48 EC, the provisions cited by the referring court, or also Article 49 TFEU in conjunction with Article 54 TFEU, is applicable ratione temporis in the main proceedings, in view of the identical content of the provisions.
17.      Before the two kinds of group structures are examined separately, it should first be stated that freedom of establishment is the relevant fundamental freedom in this instance because, by virtue of its requirement of a 95% shareholding, the Netherlands regime is intended to apply only to those shareholdings which enable the holder to exert a definite influence on a company’s decisions and to determine its activities. (4)
A –    Tax entity formed by the parent company and sub-subsidiaries (Cases C‑39/13 and C‑41/13)
18.      In Cases C‑39/13 and C‑41/13 it must be examined whether freedom of establishment is to be interpreted as precluding the Netherlands regime under which the parent company and sub­subsidiaries, established in the Netherlands, may combine to form a tax entity only where the intermediate subsidiary is also established in the Netherlands or at least maintains a permanent establishment there. That would be the case if the regime constituted a restriction of freedom of establishment that cannot be justified.
19.      It is necessary to examine two different possible restrictions of freedom of establishment. Both the freedom of establishment of the parent company (see section 1) and the freedom of establishment of the intermediate foreign subsidiary (see section 2) may be impaired in this instance.
1.      Restriction of the freedom of establishment of the parent company
20.      Under Article 43 EC in conjunction with Article 48 EC, or Article 49 TFEU in conjunction with Article 54 TFEU, freedom of establishment gives a company or firm formed in accordance with the law of a Member State, and having its registered office, central administration or principal place of business within the European Union, inter alia the right to pursue its activities in other Member States through a subsidiary. (5)
21.      It is settled case-law that all measures which prohibit, impede or render less attractive the exercise of the freedom of establishment must be regarded as restrictions on that freedom. (6) It is also settled case-law that freedom of establishment is not only aimed at ensuring that foreign nationals and companies are treated in the host Member State in the same way as nationals of that State, but also prohibits the Member State of origin from hindering the establishment in another Member State of a company incorporated under its legislation. (7) In the field of taxation law, the Court considers establishment to be hindered in such cases where there is a disadvantageous difference in treatment of an establishment in another Member State in comparison with a purely domestic establishment. (8)
a)      Disadvantageous difference in treatment
22.      It must therefore be examined, first of all, whether under the tax entity regime a Netherlands parent company is treated less favourably by the Member State of origin, the Netherlands, in the case of establishment by means of a subsidiary in another Member State than a parent company with a domestic subsidiary.
23.      The referring court also raises the question of which situations are to be compared in the present instance. The cross-border situation involves the formation of a tax entity with the sub-subsidiaries without the foreign subsidiary being included. If this is compared with a purely domestic situation where the subsidiary is not included in a tax entity, there is no difference in treatment as a Netherlands parent company may not form a tax entity in isolation with its sub-subsidiaries. It is another matter, however, if the cross-border situation is compared with a purely domestic situation where the subsidiary is included in a tax entity.
24.      Against this background, both the Federal Republic of Germany and the Kingdom of the Netherlands dispute that there is a difference in treatment of domestic and foreign establishments because under the Netherlands regime no one may form a tax entity with sub-subsidiaries without including the intermediate subsidiary.
25.      It is nevertheless a decisive factor that under the Netherlands regime a parent company with a foreign intermediate subsidiary does not have any possibility at all of forming a tax entity with its domestic sub­subsidiaries because the foreign subsidiary cannot form part of the tax entity. On the other hand, that possibility is available to a parent company with a domestic subsidiary. The Court considered those different possibilities to be relevant in Papillon. (9) They constitute a disadvantageous difference in treatment of a parent company which exercises its freedom of establishment by setting up a subsidiary in another Member State.
26.      To counter that view, however, the Kingdom of the Netherlands has claimed that the disadvantage stemming from the fact that it is not possible to form a tax entity with Netherlands sub-subsidiaries is, under the Netherlands regime, simply the consequence of the prohibition on including a foreign intermediate subsidiary. It states that, as the Court held in X Holding, (10) this exclusion of foreign subsidiaries from the tax entity is nevertheless compatible with freedom of establishment.
27.      I can concur with this point of view in so far as the Netherlands regime clearly does not include any provision which expressly prescribes that domestic parent companies may not form a tax entity with their domestic sub-subsidiaries if the intermediate subsidiary is established abroad. The disadvantage simply stems from the fact that the Netherlands regime does not permit the formation of a tax entity just between parent companies and sub-subsidiaries in general and, at the same time, denies a domestic parent company the opportunity to form a tax entity with a foreign subsidiary.
28.      In the light of the judgment in X Holding, however, a distinction must be drawn between different disadvantages stemming from the exclusion of foreign companies. (11) That exclusion does not just mean that a foreign subsidiary may not participate in the tax entity. Another consequence of that exclusion is that the domestic sub-subsidiaries are also denied the opportunity to participate in the tax entity. In X Holding, however, it was only examined whether the disadvantage arising from the fact that the non-resident subsidiaries may not participate in the tax entity is objectionable per se. On the other hand, that judgment did not explore the question whether the further consequences of the exclusion, in particular the disadvantage here that domestic sub-subsidiaries cannot be included in a tax entity, are also compatible with freedom of establishment.
29.      Consequently, a disadvantageous difference in treatment of a domestic parent company with a subsidiary established in another Member State compared with a domestic parent company with a domestic subsidiary must be taken to exist in so far as, because it is not possible to include the foreign subsidiary in a tax entity, the first domestic parent company is also denied the opportunity to include its domestic sub-subsidiaries.
30.      This same disadvantage is faced by the domestic parent company, moreover, if — as is addressed by the referring court in its second question in Case C‑39/13 — it is a case of domestic sub­sub­subsidiaries which cannot be included in a domestic parent company’s tax entity because both the intermediate subsidiary and the intermediate sub-subsidiary are established in another Member State.
b)      Objective comparability of the situations
31.      A restriction of freedom of establishment resulting from that disadvantageous difference in treatment exists, however, only if the differently treated situations are also objectively comparable. (12)
32.      It remains unclear what the Court is actually examining in this regard. (13) Nevertheless, on the basis of X Holding and Papillon objective comparability of the situations at issue can be taken to exist in any event.
33.      In X Holding, which likewise concerned the Netherlands tax entity regime, the Court considered it sufficient that in both situations the parent companies sought to benefit from the advantages of the regime, (14) which is so in the present instance.
34.      In Papillon, on the other hand, the Court focused on the attainment of the objective of the French group taxation regime, namely to treat the group for tax purposes broadly in the same way as an individual undertaking. According to the Court, that objective, which is also pursued by the Netherlands regime at issue, (15) can also be attained where only the parent company and the sub-subsidiaries are established on national territory. (16)
35.      The situation of a domestic parent company with domestic sub­subsidiaries and a non-resident intermediate subsidiary is therefore objectively comparable with the situation of such a domestic parent company with a resident subsidiary.
c)      Interim conclusion
36.      The freedom of establishment of a Netherlands parent company whose subsidiary is established in another Member State is therefore restricted by the fact that the Netherlands regime denies it the opportunity of forming a tax entity with its Netherlands sub­subsidiaries.
2.      Restriction of the freedom of establishment of the subsidiary
37.      Furthermore, SCA Group Holding BV has rightly pointed out that the freedom of establishment of its German intermediate subsidiary may also be restricted by the Netherlands regime.
38.      Under the second sentence of the first paragraph of Article 43 EC and the second sentence of the first paragraph of Article 49 TFEU, freedom of establishment also grants the right freely to choose the appropriate legal form in which to pursue activities in another Member State. (17) The aim is in particular to enable companies to pursue their activities under the same conditions in the host Member State with either a branch or a subsidiary. (18)
39.      That right is jeopardised, however, by the Netherlands tax entity regime. If the foreign subsidiaries had exercised their freedom of establishment in the Netherlands in the present instance through branches rather than their own subsidiaries, those branches, as permanent establishments of a foreign subsidiary, could, in principle, have been included in a tax entity with the Netherlands parent company under Article 15(4) of the Law on corporation tax. This is expressly pointed out by the referring court in its second question in Case C‑41/13.
40.      The exercise of the freedom of establishment of the foreign subsidiary in the Netherlands by the setting-up of its own subsidiary is therefore placed at a disadvantage in comparison with the exercise of that freedom by means of a branch because in the first case the foreign subsidiary cannot benefit from the advantages arising from the ability of its subsidiaries, as sub-subsidiaries, to form a tax entity with its parent company. This restricts the foreign subsidiary’s freedom to choose a legal form for its establishment in the Netherlands.
41.      Furthermore, in Philips Electronics the Court found that the situation of a permanent establishment in the host Member State and the situation of a subsidiary set up there are objectively comparable as regards benefit from the advantages of group relief. (19) There are no reasons why this should be any different in the case of the Netherlands tax entity which, among other things, also enables losses to be transferred by means of group relief.
42.      Accordingly, by denying the opportunity to form a tax entity between a Netherlands parent company and its Netherlands sub­subsidiaries, the Netherlands regime also restricts the freedom of establishment of the intermediate subsidiary established in another Member State.
3.      Justification
43.      These restrictions of the freedom of establishment of both the domestic parent companies and the intermediate foreign subsidiaries might nevertheless be justified by an overriding reason in the public interest.
44.      In X Holding it was held that the exclusion of non-resident subsidiaries from the Netherlands tax entity regime is justified in order to preserve the allocation of the power to impose taxes between Member States. (20)
45.      In the present case, however, that justification cannot apply. The tax entity is intended to be formed solely between taxable persons subject to Netherlands taxation. The fiscal sovereignty of the Kingdom of the Netherlands cannot therefore be impaired by the taking into account of foreign situations that are not subject to its fiscal sovereignty.
46.      With its third question in each case, the referring court nevertheless wishes to ascertain whether the restrictions of freedom of establishment which have now been established might be justified by the need to preserve fiscal coherence, including the prevention of unilateral and bilateral double use of losses. In the main proceedings the Netherlands tax authority had argued that permitting a tax entity only between a group’s domestic parent company and domestic sub­subsidiaries creates the risk of the double use of losses both in the host Member State and in two different Member States.
a)      Double use of losses
47.      With regard to the attempted justification on the basis of the objective of preventing the double use of losses, it must be stated at the outset that such a justification does not exist as an autonomous ground, as I have already explained elsewhere. (21) Reliance on that objective alone cannot therefore justify the restriction of a fundamental freedom.
48.      This finding holds irrespective of whether the prevention of unilateral or bilateral use of losses is at issue.
49.      In the case of unilateral use, the Member State seeks to preclude the double use of losses in the context of its own tax system. It is, however, up to the Member State itself to prevent this by means of the unrestricted organisation of its tax system, if necessary by adopting specific rules on the prevention of the double use of losses.
50.      In the case of bilateral use, on the other hand, the Member State seeks to prevent a loss from being used both in its own tax system and also, on the basis of the tax rules of another Member State, in that other tax system. In Philips Electronics, however, the Court has already not recognised mere reliance on the objective of preventing the double use of losses in two different Member States as an autonomous justification. (22) Moreover, it is two sides of the same coin if, on the one hand, the Member State of origin, as is recognised, is not required to draw up its tax rules on the basis of those in another Member State in order, in all circumstances, to prevent a difference in treatment of cross-border establishments (23) and, on the other hand, it also cannot rely on the tax rules of another Member State as justification for a difference in treatment of its own.
51.      Consequently, whilst the objective of preventing the double use of losses cannot, as such, justify a restrictive national tax rule a priori, I will nevertheless also make substantive comments below on the specific possibilities in the present instance of losses being used twice, as the parties have discussed this point at length.
52.      The Kingdom of the Netherlands has claimed, first of all, that the risk of the double bilateral use of losses arises because, in the event of a loss by a Netherlands sub-subsidiary, that loss can be used both at the level of the Netherlands parent company in the context of a tax entity and at the level of the foreign intermediate subsidiary, by virtue of certain reductions in book value resulting from the loss in respect of the shareholding in the sub-subsidiary or from a claim against it. This is not possible, on the other hand, in a tax entity which includes the subsidiary, because no transactions between the companies have to be taken into account.
53.      It is not necessary to answer the question whether this is actually the same loss. The Court seems to have taken both views on this point in different judgments in respect of reductions in the book value of a shareholding. (24)
54.      In any case, however, any possibility of the double use of losses cannot justify the restriction at issue because this cannot be prevented by the prohibition on a Netherlands parent company from forming a tax entity with its Netherlands sub-subsidiaries. MSA International Holdings BV has rightly pointed out that the prohibition on forming a tax entity does not prevent the loss of the sub-subsidiary from continuing to be used in the Netherlands — for example when the loss is carried forward by that company — whilst, at the same time, the reductions in the book value of the assets of the foreign intermediate subsidiary remain.
55.      Furthermore, the Netherlands tax authority claimed in the main proceedings that the double use of losses can also arise unilaterally within the Netherlands and must therefore be prevented. In its submission, in this instance too a loss arising in a sub-subsidiary can, through a related deterioration in the financial situation of the foreign subsidiary, result, for the domestic parent company, in reductions in the book value of claims against the foreign subsidiary or in a loss in the event of its liquidation. This is ruled out, however, where the subsidiary forms part of the tax entity.
56.      However, here too, the prohibition on the formation of a tax entity between domestic parent companies and sub-subsidiaries is neither appropriate nor necessary to attain the objective of preventing the double use of losses in the Netherlands. Even where a tax entity did not exist, any loss to be regarded as identical would be used twice, admittedly not in respect of a single taxable person, but distributed between the parent company and the sub-subsidiary. Furthermore, the Netherlands legislation itself may prevent such a double use of losses in the Netherlands. Thus, the Rechtbank Haarlem pointed out at first instance in the main proceedings that the Decree on tax entities already contained rules to that effect for the case of a foreign intermediate subsidiary with a domestic permanent establishment.
57.      It must therefore be stated that the prevention of the bilateral or unilateral double use of losses cannot in any event justify the restrictions at issue.
b)      Coherence of the national tax system
58.      It is settled case-law that a restriction of the fundamental freedoms can also be justified by the need to preserve the coherence of a national tax system. To that end, a direct link has to be established between the granting of a tax advantage and the offsetting of that advantage by a particular tax. (25) In such a situation, the holder of the fundamental freedom may be denied the tax advantage because he is not subject to the directly linked tax burden. The question whether the link is direct must be examined in the light of the objective pursued by the tax system. (26)
59.      The question thus arises here whether the prohibition on the formation of a tax entity between the Netherlands parent company and its Netherlands sub-subsidiaries is justified because the parent company avoids a directly linked tax burden.
60.      It is true that in Papillon the Court recognised in principle, with regard to the French ‘tax integration’ regime, that there is a direct link between the possibility of transferring losses between the participating companies and the fiscal neutralisation of certain transactions between them, thereby preventing the double use of losses. (27) Consequently, the refusal of the ‘tax integration’ of the domestic parent company and sub­subsidiary in the case of a foreign intermediate subsidiary can be justified, in principle, by the objective of ensuring the coherence of the national system.
61.      The same conclusion could now also be drawn with regard to the Netherlands tax entity regime, as treatment of the participating companies as a single company means both that losses of individual companies can be used for the group as a whole and that there is full fiscal neutralisation of the transactions between all the companies in the tax entity. However, in the case of a tax entity between only the domestic parent company and sub-subsidiaries such neutralisation would not occur between the domestic parent company and the foreign subsidiary, with the result that the parent company could thus avoid the disadvantages of the tax entity.
62.      Nevertheless, it is uncertain whether in the present instance, with regard to the fiscal neutralisation of the transactions between the domestic parent company and the foreign subsidiary, it is possible to speak, from the point of view of fiscal coherence, of a tax burden which offsets the tax advantage of using losses across the group. The full fiscal neutralisation of those transactions in the Netherlands tax entity system can be both a tax burden and an advantage, depending on whether the transactions create a loss or a profit in relation to the subsidiary without such neutralisation. Accordingly, the parent company does not necessarily avoid a tax burden because the foreign intermediate subsidiary is not included in the tax entity.
63.      In any case, however, the Court pointed out in Papillon that in order to justify a restriction of the freedom of establishment of a domestic parent company, fiscal coherence must also not be attainable by means of measures which are less restrictive of the freedom of establishment. (28) In the Netherlands system, the advantages of the tax entity are also granted to a foreign company which has a permanent establishment in the Netherlands. In this regard, the Netherlands system remedies the lack of fiscal neutralisation between the domestic parent company and the foreign subsidiary through the provisions of the Decree on tax entities. If the Netherlands tax system thus permits a tax entity even where fiscal neutralisation between the parent company and the subsidiary is not automatically created by the latter’s inclusion in the tax entity, but only through subsequent corrections, this constitutes a less onerous means of preserving fiscal coherence. As the Rechtbank Haarlem has already found at first instance in the main proceedings, in order to avoid any incoherence in the Netherlands tax system the sub-subsidiaries could therefore be treated like permanent establishments of the foreign intermediate subsidiary.
64.      The difference in treatment of domestic subsidiaries of foreign companies and their domestic permanent establishments, which restricts the freedom of establishment of the foreign intermediate subsidiary, also cannot be justified by the preservation of fiscal coherence. Even when questioned at the hearing, the Kingdom of the Netherlands was unable to explain why the two forms of establishment should be treated differently in the Netherlands tax system as regards the formation of a tax entity.
65.      Nor am I convinced by the objection raised by the Member States participating in the proceedings against being guided by Papillon on the ground that the Netherlands tax entity should be distinguished, as far as its operation is concerned, from the French ‘tax integration’ which was the subject of Papillon. At the hearing the Kingdom of the Netherlands rightly argued that the main difference is that in the French system each company determines its own operating result and only then do the effects of ‘tax integration’ occur in the form of transfers of losses and fiscal neutralisation of individual transactions, whereas the Netherlands system does this by treating the companies as a single taxable person. However, it has neither been submitted, nor is clear from other sources, in what way this difference might result in a different assessment of the justification of a restriction of freedom of establishment.
66.      Accordingly, neither the restriction of the freedom of establishment of the domestic parent company nor the restriction of the freedom of establishment of the foreign intermediate subsidiary can be justified by the preservation of fiscal coherence.
4.      Conclusion for Cases C‑39/13 and C‑41/13
67.      Consequently, with regard to Cases C‑39/13 and C‑41/13 it must be stated that the Netherlands regime, under which a parent company and sub-subsidiaries established in the Netherlands may combine to form a tax entity only where the intermediate subsidiary is also established in the Netherlands or at least maintains a permanent establishment there, infringes freedom of establishment.
B –    Tax entity formed by sister companies (Case C‑40/13)
68.      With regard to Case C‑40/13 it must now be examined whether freedom of establishment also precludes the Netherlands regime in so far as under that regime sister companies established in the Netherlands may combine to form a tax entity only where the parent company is also established in the Netherlands or at least maintains a permanent establishment there.
1.      Restriction of the freedom of establishment of the parent company
69.      The freedom of establishment of the parent company established in another Member State could be restricted by the Netherlands tax entity regime.
70.      Freedom of establishment prohibits the different tax treatment of non-resident and resident companies in the host Member State where, with regard to the national measure at issue, those companies are in an objectively comparable situation. (29)
71.      First, a disadvantageous difference in treatment of the foreign parent company compared with a domestic parent company would therefore have to be established.
72.      The Federal Republic of Germany and the Kingdom of the Netherlands dispute that there is such a difference in treatment because under the Netherlands regime no one may form a tax entity without a parent company.
73.      In this regard too, however, it should be reiterated (30) that the disadvantageous difference in treatment stems from the fact that the foreign parent company, unlike a domestic parent company, is unable to form a tax entity with its subsidiaries. This is the consequence of the fact that it is not possible under the Netherlands regime to include foreign companies in a tax entity. Since their inclusion is precluded, the foreign parent company also suffers a disadvantage in so far as it cannot benefit from the ability of its Netherlands subsidiaries at least to be included in a tax entity. There is thus a disadvantageous difference in treatment of the foreign parent company.
74.      Furthermore, the domestic and the foreign parent company would also have to be in an objectively comparable situation as regards the tax entity regime.
75.      Having regard once again to the relevant analysis by the Court in Papillon, (31) it can only be stated that the objective of the Netherlands tax entity regime, namely treatment of a group as a single undertaking, can also be partially attained in the case of a foreign parent company through the consolidation of only its subsidiaries established in the Netherlands.
76.      The Federal Republic of Germany, in particular, objected to this view, however, on the ground that under the Netherlands regime a consolidation at the level of the subsidiary is entirely impossible, as consolidation takes place at the level of the parent company. In addition, the tax entity is based on the idea that the parent company controls its subsidiaries. Such a relationship of control does not exist at all between subsidiaries.
77.      As the Commission rightly stated at the hearing, the question of in which company the tax entity consolidation takes place is purely technical and irrelevant as far as the attainment of the objective of the regime is concerned. If the effects of a tax entity formed between the subsidiaries can be made possible in principle, the question of the taxable person to which the operating result is ultimately attributed is of secondary importance.
78.      Furthermore, the argument put forward by the Federal Republic of Germany fails to appreciate that there is a relationship of control between a foreign parent company and its domestic subsidiaries. In other words, it is not possible for absolutely any domestic company to form a tax entity in the present instance. Rather, it is a question of the consolidation of subsidiaries controlled by a common parent company. The sole difference in the situations to be compared is that the parent company is established in another Member State and cannot therefore be included in the tax entity.
79.      The finding of a restriction of freedom of establishment as a result of the prohibition of the sister companies from forming a tax entity is also not ruled out because — as the referring court adds with its second question — the common parent company of the sister companies to be consolidated is only at a higher level of the group structure, where the intermediate companies cannot themselves be part of the tax entity because they are established in another Member State.
80.      Consequently, the Netherlands regime, under which sister companies established in the Netherlands may combine to form a tax entity only where the parent company is also established in the Netherlands or at least maintains a permanent establishment there, constitutes a restriction of the freedom of establishment of the foreign parent company.
2.      Justification
81.      There is no evident justification for this restriction. In essence, all the relevant aspects have already been examined in connection with Cases C‑39/13 and C‑41/13. (32)
82.      Where a tax entity is formed between the domestic subsidiaries of a foreign parent company, the preservation of the allocation of the power to impose taxes between Member States is likewise not affected since only the consolidation of domestic companies is at issue.
83.      The prevention of the double use of losses in the case of a domestic subsidiary and a foreign parent company cannot be recognised as an autonomous justification, nor could double use be prevented by prohibiting a tax entity between the subsidiaries.
84.      Similarly, the preservation of fiscal coherence cannot for all the more reason be a successful justification where a tax entity is formed between the domestic subsidiaries of a foreign parent company. Unlike where a tax entity is formed between a domestic parent company and sub-subsidiaries, within the tax entity formed by subsidiaries there are no evident transactions which require fiscal neutralisation.
85.      In so far as the Kingdom of the Netherlands additionally considers that a risk of tax abuse resides in the fact that a transfer of assets between the sister companies which is not consistent with the market value but is fiscally neutral by reason of the tax entity may result in the tax-effective reduction of the book value of a claim on the part of the foreign parent company vis-à-vis a domestic sister company, it should be pointed out that in this regard only the State in which the foreign parent company is established would have competence to combat the abuse.
86.      Moreover, acceptance of the existence of a prohibited restriction of freedom of establishment also does not lead to the conclusion that, as the Federal Republic of Germany complains, the Kingdom of the Netherlands must introduce a special right for groups with foreign participation. Consolidation of the domestic sister companies in the context of the tax entity is also provided for in the case of a group with a domestic parent company. In the case of a foreign parent company, freedom of establishment thus only guarantees that the foreign parent company benefits from the advantages of the Netherlands tax system, at least as far as the domestic sister companies are concerned, if it cannot itself be part of the tax entity.
3.      Conclusion for Case C‑40/13
87.      With regard to Case C‑40/13 it must therefore be stated that the Netherlands regime, under which the sister companies established in the Netherlands may combine to form a tax entity only where the parent company is also established in the Netherlands or at least maintains a permanent establishment there, infringes freedom of establishment.
VI –  Conclusion
88.      In the light of the foregoing, the questions referred for a preliminary ruling must be answered as follows:
Article 43 EC in conjunction with Article 48 EC and Article 49 TFEU in conjunction with Article 54 TFEU must be interpreted as precluding a national regime, as applicable in the main proceedings, which, in connection with taxation of company profits:
–        offers domestic parent companies the possibility of forming a tax entity with their domestic sub-subsidiaries only where the intermediate subsidiary is also established on national territory or where it is established in another Member State but has a permanent establishment on national territory;
–        offers domestic subsidiaries the possibility of forming a tax entity with each other only where their parent company is also established on national territory or where it is established in another Member State but has a permanent establishment on national territory.
1 – Original language: German.
2 – Case C‑418/07 [2008] ECR I‑8947.
3 – Case C‑337/08 [2010] ECR I‑1215.
4 – See, in particular, Case C‑35/11 Test Claimants in the FII Group Litigation [2012] ECR, paragraph 91.
5 – See, in particular, Case C‑186/12 Impacto Azul [2013] ECR, paragraph 32 and the case-law cited.
6 – See, in particular, Case C‑380/11 DI. VI. Finanziaria di Diego della Valle & C. [2012] ECR, paragraph 33 and the case-law cited.
7 – See, in particular, DI. VI. Finanziaria di Diego della Valle & C., cited in footnote 6, paragraph 32 and the case-law cited.
8 – See, in particular, Papillon, cited in footnote 2, paragraphs 16 to 23.
9 – See Papillon, cited in footnote 2, paragraph 21.
10 – X Holding, cited in footnote 3.
11 – See also, in this regard, Papillon, cited in footnote 2, paragraph 17.
12 – See in this regard Papillon, cited in footnote 2, paragraph 27, and X Holding, cited in footnote 3, paragraph 20.
13 – See in this regard my Opinion in Case C‑123/11 A [2013] ECR, point 40.
14 – See X Holding, cited in footnote 3, paragraph 24.
15 – See X Holding, cited in footnote 3, paragraph 18.
16 – See Papillon, cited in footnote 2, paragraph 29.
17 – See, inter alia, Case 270/83 Commission v France [1986] ECR 273, paragraph 22; Case C‑231/05 Oy AA [2007] ECR I‑6373, paragraph 40; and the order in Joined Cases C‑439/07 and C‑499/07 KBC Bank and Beleggen, Risicokapitaal, Beheer [2009] ECR I‑4409, paragraph 77.
18 – See Case C‑253/03 CLT-UFA [2006] ECR I‑1831, paragraph 15, and Case C‑18/11 Philips Electronics [2012] ECR, paragraph 14.
19 – See Philips Electronics, cited in footnote 18, paragraph 19.
20 – See X Holding, cited in footnote 3, paragraph 25 et seq.
21 – See my Opinion in Philips Electronics, cited in footnote 18, point 58 et seq.
22 – See Philips Electronics, cited in footnote 18, paragraph 31 et seq.
23 – See Case C‑293/06 Deutsche Shell [2008] ECR I‑1129, paragraph 43, and Case C‑371/10 National Grid Indus [2011] ECR I‑12273, paragraph 62.
24 – See Papillon, cited in footnote 2, paragraph 47, on the one hand, and Case C‑347/04 Rewe Zentralfinanz [2007] ECR I‑2647, paragraph 47, on the other hand.
25 – See, in particular, Papillon, cited in footnote 2, paragraphs 43 and 44, and Case C‑181/12 Welte [2013] ECR, paragraph 59.
26 – Papillon, cited in footnote 2, paragraph 44.
27 – Papillon, cited in footnote 2, paragraph 45 et seq.
28 – Papillon, cited in footnote 2, paragraph 52 et seq.
29 – See, to that effect, Case C‑374/04 Test Claimants in Class IV of the ACT Group Litigation [2006] ECR I‑11673, paragraph 46, and Case C‑282/07 Truck Center [2008] ECR I‑10767, paragraph 36.
30 – See above, point 28.
31 – See above, point 34.
32 – See above, point 43 et seq.