Provisional text
OPINION OF ADVOCATE GENERAL
KOKOTT
delivered on 26 March 2026 (1)
Case C‑592/24
Agenzia delle Entrate
v
Société Générale S.A.,
SG Factoring SpA,
SG Leasing SpA,
Fraer Leasing SpA,
SG Equipment Finance Italy SpA
(Request for a preliminary ruling from the Corte suprema di cassazione (Supreme Court of Cassation, Italy))
( Reference for a preliminary ruling – Fundamental freedoms – Freedom of establishment – Corporation tax – Group taxation – Horizontal and vertical integration – Permanent establishment of a non-resident parent company – Attribution of the controlled shareholdings to the business assets of the resident permanent establishment of a non-resident parent company – Group taxation by means of a ‘non-controlling’ permanent establishment – Principles of equivalence and effectiveness – Compliance with a domestic time limit for applying for group taxation the impossibility of which may be contrary to EU law )
I.      Introduction
1.        In these proceedings, the Court is called upon to clarify whether the fundamental freedoms merely prohibit discrimination against cross-border cases or also require such cases to be afforded preferential treatment (through the offer of an unlimited group taxation option whereby the shares in the controlled companies are not also subject to the tax sovereignty of the State where the tax group is located).
2.        In this instance, a French undertaking is attempting to secure the benefit of cross-border group taxation after the national deadline for applying for it has expired (that is, retrospectively). Relying on EU law, it claims that interest payments to the French parent company, which is not part of the group in question, should be treated in the same way as interest payments to a parent company established in Italy which is part of such a group.
3.        It is true that the French parent company has a permanent establishment in Italy (which would in principle be sufficient for vertical integration under Italian law). However, the shares in the controlled Italian subsidiaries were not attributed to that permanent establishment.
As a result, any increase in the value of those shares is not subject to Italian tax sovereignty. This probably accounts for the fact that, in the years at issue, Italy does not permit group taxation by way of a mere permanent establishment of the French parent company.  In Italy, group taxation is possible only on condition of compliance with the deadline for applying for it, and is, therefore, not possible retrospectively.
4.        It must therefore be clarified, first, whether the refusal to grant the advantages of group taxation in the present case infringes the fundamental freedoms and, if so, secondly, whether it is then the case that, under EU law, the benefit of group taxation is available retrospectively and without the need to comply with the application deadline actually laid down.
II.    Legal framework
A.      European Union law
5.        The EU law framework is formed by the freedom of establishment enjoyed by companies under Articles 49 and 54 TFEU.
B.      Italian law
6.        In Italian law, Decreto del Presidente della Repubblica 22 dicembre 1986, n. 917 (Approvazione del testo unico delle imposte sui redditi) (Decree No 917 of the President of the Republic of 22 December 1986 approving the consolidated law on income tax; ‘the TUIR’) contains a form of interest deduction limitation.
7.        Article 96(5-bis) of the TUIR provides:
‘Interest payments made by the entities referred to in the first sentence of paragraph 5 shall be deductible from the basis of assessment for that tax by up to 96% of their amount. In the context of the national tax consolidation scheme referred to in Articles 117 to 129, the total amount of interest paid by the entities referred to in the preceding sentence participating in the consolidation to other participating entities shall be fully deductible up to the total amount of interest paid by the participating entities to entities not included in the consolidation. The parent company or entity shall deduct in full the interest payments referred to in the preceding sentence when making the declaration referred to in Article 122, by making the relative downward adjustment of the algebraic sum of the total net income of the persons participating’.
8.        Article 117 of the TUIR, in the version applicable to the tax years concerned, provides:
‘1.      The parent company or entity and each subsidiary company falling within the categories of entities referred to in Article 73(1)(a) and (b), between which there is a relationship of control of the kind envisaged in subparagraph 1 of the first paragraph of Article 2359 of the Civil Code, under the conditions laid down in Article 120, may jointly exercise the group taxation option.
2.      The entities referred to in Article 73(1)(d) may exercise the option referred to in paragraph 1 only in their capacity as parent companies and on the condition that:
(a)      they are resident in countries with which an agreement for the avoidance of double taxation is in force;
(b)      they carry on, within the territory of the State, a business activity, as defined in Article 55, through a permanent establishment, as defined in Article 162, the assets of which include the shareholding in each subsidiary company.
3.      Provided that the control requirement referred to in paragraph 1 continues to be met, the option shall last for three financial years and be irrevocable.
If that requirement is no longer met, the consequences referred to in Article 124 shall apply’.
III. The main proceedings
9.        Société Générale S.A., a company incorporated under French law (‘the parent company’), has a permanent establishment in Italy (SG Milano; ‘the Italian permanent establishment’). It seems that a number of Italian subsidiaries participated in the Italian tax consolidation (‘group taxation’) scheme via that permanent establishment. Where group taxation was possible, this was because the shareholdings in those controlled subsidiaries were part of the assets of the Italian permanent establishment (and not part of the assets of the parent company established in France).
10.      Four further Italian subsidiaries of the parent company (SG Factoring SpA, SG Leasing SpA, Fraer Leasing SpA
and SG Equipment Finance Italy SpA;
‘the applicant subsidiaries’) did not participate in the group taxation scheme because the conditions of participation were not met. It seems that their shareholdings were attributed to the assets of the parent company in France, and in any event not to the assets of the parent company’s permanent establishment in Italy.
11.      However, the applicant subsidiaries paid interest in Italy to the French parent company (in the form of the Italian permanent establishment) and – because they did not participate in the scheme for consolidation with the branch – deducted only 96% of the amount of those interest payments when determining the basis of assessment to corporation tax, in accordance with Article 96(5-bis) of the TUIR.
12.      On 19 June 2015, the parent company filed with the Agenzia delle Entrate (Revenue Agency, Italy; ‘the finance administration’) three applications for reimbursement of the corporation tax for the tax years 2010, 2011 and 2012 which the applicant subsidiaries had overpaid because the remaining 4% of the interest payments they had made were not deductible from their income. The reimbursement sought amounted, for the tax years concerned, to EUR 215 156, EUR 476 878 and EUR 301 275 respectively.
13.      On 28 December 2016, the finance administration issued to the parent company three refusal decisions, one in respect of each of the tax years in question, on the ground that, in its view, the conditions for the applicant subsidiaries’ inclusion in the group taxation scheme, laid down in Article 117(2) of the TUIR, were not met because the parent company’s permanent establishment had not included the shareholdings in the applicant subsidiaries in its assets.
14.      The parent company unsuccessfully brought an action against those decisions before the Commissione Tributaria Provinciale di Milano (Provincial Tax Court, Milan, Italy). However, the Commissione Tributaria Regionale della Lombardia (Regional Tax Court, Lombardy, Italy), seised of the appeal which the parent company had brought against that judgment, granted the forms of order so sought, by judgment No 4061/06/2019 (‘the judgment under appeal’). The finance administration appealed that judgment to the Corte suprema di cassazione (Supreme Court of Cassation, Italy), the referring court. The parent company and the applicant subsidiaries lodged a further appeal.
15.      The tax administration submits, first, that the conditions of group taxation are not met. It states, secondly, that group taxation comes into effect not by operation of law but only on application. However, such an application is subject to a time limit and, that time limit having expired, was no longer possible in this instance.
16.      The referring court takes the view that the freedom of establishment may be infringed where, under a group taxation scheme, companies whose parent company has its seat in another country are denied the possibility of deducting interest payments, whereas that possibility is granted to companies with a common parent company established in national territory. In addition, it raises the question as to whether an application for group taxation is necessary even in a situation where that possibility was not available – because the conditions attaching to it were not met.
IV.    Request for a preliminary ruling and procedure before the Court
17.      It was against that background that the Corte suprema di cassazione (Supreme Court of Cassation) stayed the proceedings and referred the following three questions to the Court of Justice:
‘(1)      Do Articles 49 and 54 TFEU, as interpreted by the Court [of Justice in the judgment] in SCA Holding (C‑39/13 to C‑41/13), preclude national legislation which prevents certain companies from benefiting, under the national tax consolidation scheme, from a more favourable regime of deductibility of interest payments, on the sole ground that the common parent company is resident in another Member State and thus they cannot have access to that national tax consolidation scheme, whereas those companies would have benefited from that more favourable deductibility regime if their parent company had been resident in Italy or if the shareholdings of those companies had been attributed to the permanent establishment of the non-resident parent company?
(2)      Do Articles 49 and 54 TFEU, as interpreted by the Court
[of Justice in the judgment] in SCA Holding (C‑39/13 to C‑41/13), preclude national legislation which permits only vertical tax integration between a resident parent company and its resident subsidiaries, and horizontal tax integration between companies controlled by a non-resident company, and which, by contrast, excludes tax integration between subsidiaries and non-resident parent companies?
(3)      Do Articles 49 and 54 TFEU, as interpreted by the Court
[of Justice in the judgment] in SCA Holding (C‑39/13 to C‑41/13) and in the light of the principles of effectiveness and equivalence referred to in the judgment of the Court of 14 May 2020, B and others, C‑749/18, preclude national legislation which provides that failure to exercise the option for tax consolidation, at a time when that tax consolidation was not permitted, may subsequently prevent access to the effects (restoration, by means of reimbursement) of the correct application of Community law, and therefore to the disapplication of the national legislation which conflicts with it?’
18.      In the procedure before the Court, written observations have been submitted by Société Générale (together with SG Factoring, SG Leasing, and Fraer Leasing), the Italian Republic and the European Commission. In accordance with Article 76(2) of the Rules of Procedure, the Court decided not to hold a hearing.
V.      Legal assessment
A.      The questions referred for a preliminary ruling
19.      The three questions concern in part (first and second questions) material tax law and in part (third question) the law governing tax procedure. On closer examination, the first and second questions concern the crucial issue of whether the fundamental freedoms demand cross-border group taxation. These questions can be answered together, even though, contrary to their wording, in the years at issue, purely horizontal group taxation between the subsidiaries of a foreign parent company had not yet been provided for in Italy, having only been introduced, it seems, in 2015. However, the Court’s ruling
in the judgment in
SCA Holding, (2) which is expressly referred to in both questions (see section B), contains nothing in that regard that could provide an affirmative answer to this question.
20.      The third question, on the other hand, concerns the procedural conditions applicable, in the event that the fundamental freedoms demand group taxation in this instance. Since the benefit of domestic group taxation was contingent upon the filing of an application within a certain time limit, the question arises as to whether EU law requires retrospective and application-free group taxation where this has not previously been provided for (possibly in breach of EU law). The judgment of the Court of Justice in B and Others, (3) mentioned by the referring court, concerned that very situation and found this not to be the case (see section C).
B.      Group taxation involving a parent company established in another country
1.      Permanent establishment as a dependent part of a parent company
21.      By the first two questions, the referring court wishes to ascertain whether the freedom of establishment under Article 49 TFEU precludes the Italian group taxation legislation because it does not permit group taxation involving a parent company established in another country (a ‘non-resident parent company’), whereas group taxation is possible in the case where there is a parent company established in national territory (a ‘resident parent company’). On closer examination, that question is misleading, since Italy does permit group taxation involving a non-resident parent company.
22.      After all, as is clear from the second part of the first question itself, group taxation involving a non-resident parent company is possible if the latter has a resident permanent establishment. However, a permanent establishment is not an independent entity or even a legal person in its own right, but only a dependent part of a legal person – in this instance, the non-resident parent company. So it is, for example, that contracts cannot be concluded with a permanent establishment. The only entity the permanent establishment can contract with is the corresponding legal person, that is to say, the parent company. Only for tax purposes (in particular in the context of international income tax law) is a permanent establishment treated as an independent company, since the right to tax the profits of a permanent establishment (see Article 7 of the OECD Model Tax Convention) is assigned to the State where the permanent establishment is located.
23.      In order, for that purpose, to make it possible to split the parent company’s profits between the countries concerned, that is to say between the head office in one country and the permanent establishment in another country, the power flows between them are fictitiously treated as taking place between two legal persons and their respective business assets are likewise separated. Increases in the value of the business assets of a permanent establishment are generally taxed by the State in which the permanent establishment is located, while increases in the value of the business assets of the head office are taxed by the State where the head office is located.
24.      Consequently, the Italian legislation allows group taxation involving a non-resident parent company provided that, like a resident parent company,
the non-resident parent company, too, falls within the scope of Italian tax sovereignty. That is the case where shares in the controlled group members are also attributed to the resident permanent establishment of the non-resident parent company and are therefore included in the business assets of the permanent establishment (referred to here as a ‘qualified permanent establishment’). In those circumstances, moreover, a qualified permanent establishment of this kind is comparable to a resident parent company, since the business assets of a resident parent company normally also include the shareholdings of the controlled resident subsidiaries.
25.      In that context, the Italian legislation, contrary to the view which the Commission appears to take, does not distinguish on the basis of whether the parent company is established in national territory or in another country but on the basis of whether the non-resident parent company has a qualified permanent establishment in national territory (comparable to a resident parent company) and is therefore comparably subject to Italian taxation sovereignty (that is to say, in relation to controlled shareholdings). This is not the case where the controlled shareholdings are subject to the tax sovereignty of another State and are not therefore attributed to the business assets of the resident permanent establishment (referred to here as a ‘simple permanent establishment’).
26.      Since, in this case, the shares in the applicant subsidiaries are not attributed to the business assets of the Italian permanent establishment, Italy cannot tax increases in the value of the ‘controlled’ shareholdings. It must, rather, be assumed that these form part of the business assets of the French parent company and are then taxed in the State where the parent company is located (in this case,
France).
27.      On closer inspection, therefore, the referring court’s first two questions concern whether the freedom of establishment requires (vertical) group taxation in national territory even in the case where, in the absence of a qualified permanent establishment, the right to tax increases in the value of shares held in another country exists only in that other country.
28.      The purpose of group taxation is ultimately to combine several independent taxable persons into a single taxable person so as to be able to consolidate profits and losses. Such consolidation would occur automatically if the taxable person were organised not as a group of companies with controlled subsidiaries but as a sole proprietorship (possibly with several permanent establishments). It follows that group taxation of this kind serves also to preserve the neutrality of the legal form of a taxable person (as holder of fundamental rights) and, therefore, the neutrality of its organisation.
29.      It is to be noted in this regard, however, that, as the harmonisation of income tax law currently stands, such consolidation can take place in only one Member State. If that were not the case, taxable persons would be free to choose which profits and losses they would like to tax in which Member State. (4) This would also pave the way for aggressive tax planning. Group taxation is therefore confined to one Member State. (5) It is for this reason that, in the much more harmonised sphere of value added tax, even the EU legislature limits the possibility of group taxation (that is to say, treatment as a single taxable person) to the relevant Member State (see Article 11 of Directive 2006/112/EC on the common system of value added tax (6)).
30.      In this context, a permanent establishment can, as a dependent entity, take on the function of a controlling parent company for the purposes of vertical integration in the Member State concerned. This, however, is subject to the condition that, in much the same way as a resident parent company, it represents the non-resident parent company in national territory (by means of a qualified permanent establishment). That condition is not met, however, where shareholdings are attributed not to the permanent establishment but to the head office in another State. The fact, as is the case in Italy, that payments to a simple permanent establishment are treated as payments to a non-resident third party is therefore consistent with tax law.
2.      No adverse effect on the freedom of establishment in this particular case
31.      The freedom of establishment provided for in Article 49 in conjunction with Article 54 TFEU did not have the effect of extending the legal consequences of group taxation beyond the relevant tax territory (that is to say, cross-border group taxation).
32.      Freedom of establishment, which Article 49 TFEU grants to EU nationals, includes the right for them to take up and pursue activities as self-employed persons and to set up and manage undertakings under the conditions laid down for its own nationals by the law of the Member State in which such establishment is effected. It entails, in accordance with Article 54 TFEU, for 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 European Union, the right to exercise their activity in the Member State concerned through a subsidiary, a branch or an agency. (7)
33.      In the case of companies, their seat for the purposes of Article 54 TFEU serves, in the same way as nationality in the case of individuals, as the connecting factor with the legal system of a Member State. However, acceptance of the proposition that the Member State of residence may freely apply different treatment merely by reason of the fact that the seat of a company is situated in another Member State would deprive Article 49 TFEU of its meaning. Freedom of establishment seeks to guarantee the benefit of national treatment in the host Member State, by prohibiting any discrimination based on the place in which companies have their seat. (8)
34.      The consequence of the Italian group taxation scheme is that, in the case of interest payments to another company in the group, the 4% prohibition on the deduction of interest (that is to say, the prohibition on claiming back in full any interest expenses incurred for business purposes) does not apply (or applies only to a limited extent). This gives companies in such a group an advantage by comparison with interest payments to third parties (that is to say to parties outside the group).
(a)    Comparison group
35.      It is true that this constitutes unequal treatment. Contrary to the view taken by the referring court, however, the unequal treatment lies not between groups with non-resident parent companies, on the one hand, and groups with resident parent companies, on the other. It arises only between groups in which shares in the controlled subsidiaries are held by a resident (parent) company or a resident qualified permanent establishment (i.e. located in national territory), on the one hand, and groups in which shares in the controlled subsidiaries are not held in national territory and in which payments are made not horizontally (within the group) but vertically to the non-resident parent company (possibly via a resident simple permanent establishment), on the other.
36.      In other words, payments to non-controlling resident taxable persons are treated differently from payments to controlling resident taxable persons. At the same time, the restriction on the deduction of interest on payments to non-controlling taxable persons does not in itself constitute unequal treatment (and certainly not discrimination, therefore), since it applies irrespective of where the recipient has its seat. Without control, there is by definition no group taxation.
37.      Neither does the restriction on the deduction of interest on payments to a controlling taxable person differentiate according to where the taxable person is established, but according to whether the recipient and the controlled shareholdings are fully subject in this regard to the tax sovereignty of the State where the group taxation is applied. For, as explained above, the restriction on the deduction of interest on payments to a resident parent company would likewise not apply if those payments were made via a resident permanent establishment in whose business assets the paying party’s shareholdings are held (a qualified permanent establishment).
38.      The decisive comparison group for the present case (payment by a resident subsidiary to a simple resident permanent establishment of the non-resident parent company) is therefore a resident subsidiary which makes a payment to a resident parent company but the shares in the subsidiary are attributed not to the parent company’s domestic business assets (but, for example, to a non-resident permanent establishment of the parent company). The fact of group taxation in Italy being possible in those circumstances, rendering the restriction on the deduction of interest inapplicable, would indeed give rise to unequal treatment in connection with the seat of the parent company which would, moreover, be unjustifiable. However, the request for a preliminary ruling gives no indication of the
presence of such a scenario here, which is relatively unlikely and a matter that can ultimately be examined only by the referring court.
39.      If it is assumed that such unequal treatment is not present, then the provisions at issue in the main proceedings do not operate to the disadvantage, from the point of view of tax law, of cross-border situations as compared with purely domestic situations. They do not therefore constitute a restriction which is in principle prohibited by the Treaty provisions on the freedom of establishment. (9)
(b)    Comparability
40.      On the other hand, the disadvantageous treatment of interest payments to a controlling non-resident parent company as compared with an interest payment to a controlling resident parent company is unproblematic from the point of view of EU law. Such a restriction is, after all, permissible if it relates to situations which are not objectively comparable or if it is justified by an overriding reason in the public interest that is proportionate to that objective. (10) According to the case-law of the Court, the comparability of a cross-border situation with an internal situation must be examined by reference to the objective pursued by the national provisions at issue. (11)
41.      The non-application of the restriction on the deduction of interest payments within a tax group is informed ultimately by the notion that several taxable persons are treated as a single taxable person. For that reason, interest payments within a tax group lead to neither income nor expenditure from interest, since they never leave the tax group. However, a single taxable person in national territory is also subject to the tax sovereignty of the State in question, in this case Italy, in respect of the entirety of its domestic business assets.
42.      In the present case, on the other hand, the payments were made to a taxable person in national territory (the simple permanent establishment) which is unable to demonstrate any connection with the paying subsidiaries because its shareholdings in those subsidiaries form part not of its own business assets but (presumably) of the business assets of the non-resident parent company. Consequently, such a scenario is not comparable to that of a single taxable person (or a group in which the controlled shareholdings also fall within the scope of Italian tax sovereignty). That scenario is comparable rather to that of payment to another taxable person which likewise does not hold the shareholdings in the subsidiaries and, for that reason, also cannot form a group with them. Since the scenarios are not comparable, it is therefore permissible for them to be treated differently.
(c)    Justification
43.      What is more, that difference in treatment would also be justified in order to preserve the allocation of the power to impose taxes between the Member States. After all, to give companies the option of having their losses taken into account in the Member State in which they are established or in another Member State would seriously undermine a balanced allocation of the power to impose taxes between the Member States, since the tax base would be increased in the first Member State, and reduced in the second, by the amount of the losses transferred. (12) In the correct view of the Court, (13) the same expressly applies also to a tax integration scheme (group taxation) such as that at issue here. As Italy rightly notes, the parent company is free to choose to attribute shares to the business assets of the permanent establishment.
44.      The requirement that, in order to be able to be included in a tax group, the resident permanent establishment of a non-resident parent company must also hold the controlled shareholdings in its business assets ensures that the non-resident parent company is not at liberty to decide where the profits are to be taxed if the shareholdings are sold. If that were not the case, it is likely that the shareholdings would always be attributed to a permanent establishment in a low-tax country, while the advantages of group taxation would nonetheless be enjoyed in a high-tax country. However, this would have little to do with treatment as a single taxable person in national territory, since the latter would not have such a choice.
45.      Rather, the former scenario would bring greater financial benefits than the corresponding domestic case, in which increases in the value of the controlled holdings are subject to Italian tax sovereignty. However, affording preferential treatment to cross-border activities (in the form, no less, of ‘cherry-picking’) is not the objective of the fundamental freedoms. (14) Tax legislation such as that at issue in the main proceedings would also be justified, therefore, by the requirement to preserve the allocation of the power to impose taxes between the Member States.
46.      Since the legislation in question is suitable for achieving that objective and does not go beyond what is necessary to do so, it is also proportionate. What is more, the objection that might conceivably be raised in this regard, that the restriction on the deduction of interest on payments to a resident permanent establishment of the parent company is disproportionate because interest payments are of course taxed in national territory, is unsustainable. The restriction on the deduction of interest also applies to interest payments to other resident taxable persons, even though the latter pay tax on all income from interest. The taxation of interest (in national territory) has no bearing on the restriction on the deduction of interest.
47.      Consequently, the fact that domestic tax sovereignty is limited justifies not only the exclusion of a resident simple permanent establishment which does not hold the shareholdings in the ‘controlled’ subsidiaries from ‘vertical integration’ but also, therefore, the application of the restriction on the deduction of interest on payments to such a resident simple permanent establishment. The requirement under EU law that the applicant subsidiaries should engage in horizontal integration with each other (see point 52 et seq. below in this regard) – which was not transposed in Italy until 2015 – remains unaffected by the foregoing, but, as Italy too notes, would in this instance apply only to interest payments between the subsidiaries.
3.      The Court’s previous case-law, not relevant to the present case, in the context of group taxation
48.      The referring court, the Commission and the Société Générale all rely in support of their opposing views on the Court’s previous case-law in connection with national group taxation schemes. In so doing, however, they misinterpret in my opinion the content of those decisions.
49.      Although it is true to say in this regard that the Court already considers it to be a requirement of EU law for all of the subsidiaries controlled by a non-resident parent company in a Member State to be combined if that is also the consequence in the case of a resident parent
company, (15) this is – contrary to the view taken by the Commission – of no help in this instance. For, even if all of the subsidiaries were part of the same tax group (‘horizontal integration’), the payments would not in this instance – unlike in the cases decided by the Court of Justice – be made to another part of the same tax group, since, in this case, the interest was not paid to other subsidiaries.
50.      It is rather the case here that the payments are, from a legal point of view, made to the controlling non-resident parent company, meaning that they would have left a (horizontal) tax group too, and would also, therefore, have been made outside the tax group. Consolidation would not be possible in those circumstances either. Consequently, the legal consequence of a tax group – the combination of all subsidiaries into a single taxable person – would not produce a different result in this case.
51.      In particular, the judgment in
SCA Holding, cited by the referring court, does not lead to cross-border group taxation. Group taxation was, rather, for reasons of EU law, extended to the resident sub-subsidiaries via a parent company that was also resident. (16) The part of the tax group controlling the sub-subsidiaries was therefore established in national territory and was thus subject to full tax sovereignty there. (17) This was therefore a consolidation of results in national territory. It does not follow from that judgment, however, that payments by the sub-subsidiaries to the non-resident subsidiary are to be regarded as payments in the context of resident group taxation.
52.      What is more, in the same decision, the Court extended group taxation to resident subsidiaries that were linked via a non-resident parent company (‘horizontal integration’). (18) This too, then, was a consolidation as between the results of the resident subsidiaries rather than a consolidation with the results of the non-resident parent company. Neither does it follow from that judgment, therefore, that payments by the subsidiaries to the non-resident parent company are to be regarded as payments in the context of resident group taxation. For, as I explained in my Opinion at that time, (19) the tax entity in that case was meant to be formed solely between taxable persons which were subject to full domestic taxation.
53.      The Court’s most recent ruling
in the judgment in
B and Others (20) does not lead to a different conclusion either. That case too dealt ‘only’ with the group taxation of resident companies and the resident shareholdings controlled by them (and held in their business assets). Whether payments to the non-resident parent company should have been included in the group taxation scheme was not decided in that case either. On the contrary, the Court held that that case was concerned only with the horizontal inclusion of all resident subsidiaries. (21)
54.      If I understand the Court’s previous case-law correctly, in the present case, the fundamental freedoms would have required the payment of interest to another applicant subsidiary to be included in an Italian group taxation scheme (‘horizontal integration’). However, that is not the situation in the present case, which does not concern payments which subsidiaries make to each other. Consequently, the Court’s previous case-law is not relevant here.
55.      The Court has therefore rightly never held that payments to a non-resident parent company must also be covered (‘vertical integration’ via a permanent establishment) by group taxation (that is to say, combination into a single taxable person) where the controlled shareholdings are not attributed to the resident permanent establishment (that is to say, in the case of a simple
permanent establishment).
4.      Conclusion
56.      Consequently, the answer to the first two questions must be that Articles 49 and 54 TFEU do not preclude national legislation which prevents certain companies from benefiting, under the national group taxation scheme, from a more favourable regime of deductibility of interest payments, on the sole ground that the common parent company (including the shareholdings controlled by it) is not subject to domestic tax sovereignty. That would be the case even in the situation where those companies would have been able to benefit from that more favourable regime if the shareholdings in those companies had been attributed to a resident parent company and would thus have been subject to domestic tax sovereignty.
C.      In the alternative: Requirements governing group taxation from the point of view of the law of tax procedure (third question)
57.      In the alternative, in the event that the Court takes the view, conversely, that the freedom of establishment requires not only horizontal integration between the subsidiaries themselves but also vertical integration between the subsidiaries and a simple permanent establishment (that is to say, a permanent establishment which does not also hold the shareholdings in the subsidiaries) of a non-resident parent company, the question arises as to how that freedom is to be transposed procedurally.
58.      In the tax periods relevant here, national law does not provide for group taxation that applies by operation of law. Rather, it continues to be informed by the principle of individual taxation. For the group taxation available under national law to be possible, it must be applied for
before the expiry of a certain time limit, which has not been communicated to the Court, any such an application being binding for three years. If an application is not filed within that time limit, group taxation cannot be applied even in a purely domestic case. There is therefore no unequal treatment where (retrospective) group taxation is refused because it has not been applied for within the prescribed time limit. In the absence of any unequal treatment, however, the fundamental freedoms do not apply to tax law. (22)
59.      Accordingly, the question whether non-compliance with the time limit for applying for group taxation is a matter which can be raised in opposition to the applicants in the main proceedings, in circumstances such as those of the main proceedings, must – contrary to the view taken by Société Générale – be examined with reference to the principles of equivalence and effectiveness applicable to applications intended to ensure the exercise of a right which an individual derives from EU law. (23)
60.      As regards the principle of equivalence, it is not apparent from the documents before the Court that the time limit for applying for tax integration that is laid down in Italian law infringes that principle.
61.      As regards the principle of effectiveness, it must be borne in mind that the Member States are responsible for ensuring that the rights conferred by EU law are effectively protected in each case and that that principle requires, in particular, that the tax authorities of the Member States do not render practically impossible or excessively difficult the exercise of rights conferred by EU law. (24)
62.      In accordance with settled case-law of the Court, every case in which the question arises as to whether a national procedural provision renders the application of EU law impossible or excessively difficult must be analysed by reference to the role of that provision in the procedure, its conduct and its special features, viewed as a whole, before the various national bodies. In that context, it is necessary, inter alia, to take into consideration, where relevant, the principle of the rights of the defence, the principle of legal certainty and the proper conduct of the procedure. (25)
63.      In that regard, the Court has previously
held that it is compatible with EU law to lay down reasonable time limits for bringing proceedings, in the interests of legal certainty, which protects both the taxpayer and the authorities concerned. Such periods are not by their nature such as to make it virtually impossible or excessively difficult to exercise the rights conferred by EU law, even if the expiry of those periods necessarily entails the dismissal, in whole or in part, of the action brought. (26) It is settled case-law of the Court that the fact that the Court may have ruled that the breach of EU law has occurred does not affect the starting point of the limitation period. (27)
64.      EU law does not preclude a national authority from relying on the expiry of a reasonable limitation period unless the conduct of the national authorities combined with the existence of a limitation period result in a person being totally deprived of the opportunity to enforce the rights which he enjoys under EU law before the national courts. (28)
65.      In this regard, the Court has held that
it would be contrary to the principle of effectiveness to oblige injured parties to have recourse systematically to all the legal remedies available to them even if that would give rise to excessive difficulties or could not reasonably be required of them. (29) This, however, concerned exceptional cases in which the Court accepted that there were particular financial or legal risks.
66.      It is true that, according to the legislation at issue in the main proceedings and Italian administrative and judicial practice, in the tax years 2010 to 2012, vertical tax integration between a resident permanent establishment of the non-resident parent company and its subsidiaries was not permissible if the shareholdings in those subsidiaries were not attributed to the permanent establishment. For the applicant companies in the main proceedings, however, as the Commission too rightly submits, an application for vertical tax integration did not entail financial or legal risks comparable with those at issue in those exceptional cases. (30) The reasoning set out by the Court in the judgment in
B and Others (31) can be transposed almost in its entirety here.
67.      The decision to seek so-called primary legal protection in this case was no more difficult to make than the decision, subsequently, to claim the benefit of group taxation (retrospectively). The applicant companies had the opportunity to apply for group taxation themselves at any time in the same period that was available to everyone else and to rely in this regard on the (in this case, alternative plea of) incompatibility of the Italian legislation with EU law. Neither is there anything to indicate that reliance on EU law in this case would have led to excessive difficulties or could not reasonably be required of a globally active group of companies established in France.
68.      Exceptional circumstances which make this seem unreasonable and which the abovementioned earlier case-law probably had in mind (such as penalties and non-recoverable advance payments (32) or the weaker position of the worker in a dispute with his or her employer, (33) but not the ‘risk’ of a preliminary ruling procedure (34)) have not been claimed to be present and are not in evidence here.
69.      In the light of all the foregoing, the answer to the third question must be that the principles of equivalence and effectiveness do not preclude legislation of a Member State providing for a tax integration scheme under which an application to benefit from such integration may be filed only within a certain time limit.
VI.    Conclusion
70.      I therefore propose that the Court of Justice answer the questions referred for a preliminary ruling by the Corte suprema di cassazione (Court of Cassation, Italy) as follows:
(1)      Articles 49 and 54 TFEU do not preclude national legislation which prevents certain companies from benefiting, under the national group taxation scheme, from a more favourable regime of deductibility of interest payments, on the sole ground that the common parent company (including the shareholdings controlled by it) is not subject to domestic tax sovereignty. That is the case, in the light of the judgment in
SCA Holding (C‑39/13,
C‑40/13,
C‑41/13), even in the situation where the benefit of that more favourable deductibility regime is available if the shareholdings in those companies are to be attributed to a resident parent company or a resident permanent establishment of the non-resident parent company and are thus also subject to domestic tax sovereignty.
(2)      The principles of equivalence and effectiveness do not preclude group taxation the benefit of which is available only on application within a certain time limit.
1      Original language: German.
2      Judgment of 12 June 2014, SCA Group Holding and Others (C‑39/13 to C‑41/13, EU:C:2014:1758).
3      Judgment of 14 May 2020, B and Others (Vertical and horizontal tax integration) (C‑749/18, EU:C:2020:370).
4      See to this effect the settled case-law in this regard. See judgments of 25 February 2010, X Holding (C‑337/08, EU:C:2010:89, paragraphs 29
and 30), of 15 May 2008, Lidl Belgium (C‑414/06, EU:C:2008:278, paragraph 32), and of 13 December 2005, Marks & Spencer (C‑446/03, EU:C:2005:763, paragraph 46).
5      See also to this effect judgments of 14 May 2020, B and Others (Vertical and horizontal tax integration) (C‑749/18, EU:C:2020:370, paragraph 27), of 12 June 2014, SCA Group Holding and Others (C‑39/13 to C‑41/13, EU:C:2014:1758, paragraph 43), of 25 February 2010, X Holding (C‑337/08, EU:C:2010:89, paragraph 27 et seq.) and of 27 November 2008, Papillon (C‑418/07, EU:C:2008:659, paragraph 39).
6      Council Directive of 28 November 2006 (OJ 2006 L 347, p. 1).
The first sentence of that article reads as follows: ‘each Member State may regard as a single taxable person any persons established in the territory of that Member State who, while legally independent, are closely bound to one another by financial, economic and organisational links’ (my emphasis).
7      Judgments of 14 May 2020, B and Others (Vertical and horizontal tax integration) (C‑749/18, EU:C:2020:370, paragraph 21), and of 1 April 2014, Felixstowe Dock and Railway Company and Others (C‑80/12, EU:C:2014:200, paragraph 17
and the case-law cited there).
8      Judgments of 14 May 2020, B and Others (Vertical and horizontal tax integration) (C‑749/18, EU:C:2020:370, paragraph 22), of 12 June 2014, SCA Group Holding and Others (C‑39/13 to C‑41/13, EU:C:2014:1758, paragraph 45), of 26 June 2008, Burda (C‑284/06, EU:C:2008:365, paragraph 77), and of 12 December 2006, Test Claimants in Class IV of the ACT Group Litigation (C‑374/04, EU:C:2006:773, paragraph 43).
9      On the a contrario conclusion, see judgments of 14 May 2020, B and Others (Vertical and horizontal tax integration) (C‑749/18, EU:C:2020:370, paragraph 31), of 12 June 2014, SCA Group Holding and Others
(C‑39/13 to C‑41/13, EU:C:2014:1758, paragraph 48), and of 27 November 2008, Papillon (C‑418/07, EU:C:2008:659,
paragraph 32).
10      Judgment of 14 May 2020, B and Others (Vertical and horizontal tax integration) (C‑749/18, EU:C:2020:370, paragraph 32), of 12 June 2018, Bevola and Jens W. Trock (C‑650/16, EU:C:2018:424, paragraph 20), and judgment of 25 February 2010, X Holding (C‑337/08, EU:C:2010:89, paragraph 20).
11      Judgments of 14 May 2020, B and Others (Vertical and horizontal tax integration) (C‑749/18, EU:C:2020:370, paragraph 33), of 12 June 2014, SCA Group Holding and Others
(C‑39/13 to C‑41/13, EU:C:2014:1758, paragraph 28), and of 25 February 2010, X Holding (C‑337/08, EU:C:2010:89, paragraph 22).
12      Judgments of 25 February 2010, X Holding (C‑337/08, EU:C:2010:89, paragraph 29), of 15 May 2008, Lidl Belgium (C‑414/06, EU:C:2008:278, paragraph 32), and of 13 December 2005, Marks & Spencer (C‑446/03, EU:C:2005:763, paragraph 46).
13      See expressly to this effect judgment of 25 February 2010, X Holding (C‑337/08, EU:C:2010:89, paragraph 30).
14      See, entirely correctly, to this effect, judgment of 25 February 2010, X Holding (C‑337/08, EU:C:2010:89, paragraph 32).
15      Judgment of 14 May 2020, B and Others (Vertical and horizontal tax integration) (C‑749/18, EU:C:2020:370, paragraph 27).
16      Judgment of 12 June 2014, SCA Group Holding and Others (C‑39/13 to C‑41/13, EU:C:2014:1758, paragraph 43).
17      In that connection, increases in the value of the shares of the (indirectly) controlled sub-subsidiaries were also (indirectly) recorded against the parent company, and, therefore, in national territory.
18      Judgment of 12 June 2014, SCA Group Holding and Others (C‑39/13 to C‑41/13, EU:C:2014:1758, paragraph 51).
19      See my Opinion in Joined Cases
SCA Group Holding and Others
(C‑39/13 to C‑41/13, EU:C:2014:104, point 45).
20      Judgment of 14 May 2020, B and Others (Vertical and horizontal tax integration) (C‑749/18, EU:C:2020:370).
21      Judgment of 14 May 2020, B and Others (Vertical and horizontal tax integration) (C‑749/18, EU:C:2020:370, paragraph 36).
22      On the justification for that position in case-law, see in detail my Opinion in Google Ireland (C‑482/18, EU:C:2019:728, point 35 et seq.).
23      Judgment of 14 May 2020, B and Others
(Vertical and horizontal tax integration) (C‑749/18, EU:C:2020:370, paragraph 63). See, to this effect, judgments of 24 October 2018, XC and Others (C‑234/17, EU:C:2018:853, paragraph 22), and of 21 December 2016, TDC (C‑327/15, EU:C:2016:974, paragraph 89 et seq.).
24      Judgments of 14 May 2020, B and Others (Vertical and horizontal tax integration) (C‑749/18, EU:C:2020:370, paragraph 65), and of 20 December 2017, Caterpillar Financial Services (C‑500/16, EU:C:2017:996, paragraph 41).
25      Judgments of 14 May 2020, B and Others
(Vertical and horizontal tax integration) (C‑749/18, EU:C:2020:370, paragraph 66), of 24 October 2018, XC and Others (C‑234/17, EU:C:2018:853, paragraph 49), and of 22 February 2018, INEOS Köln (C‑572/16, EU:C:2018:100, paragraph 44).
26      Judgments of 14 May 2020, B and Others (Vertical and horizontal tax integration) (C‑749/18, EU:C:2020:370, paragraph 67), of 8 September 2011, Q-Beef and Bosschaert
(C‑89/10 and C‑96/10, EU:C:2011:555, paragraph 36), and of 15 April 2010, Barth (C‑542/08, EU:C:2010:193, paragraph 29).
27      Judgments of 14 May 2020, B and Others (Vertical and horizontal tax integration) (C‑749/18, EU:C:2020:370, paragraph 67), and of 8 September 2011, Q-Beef and Bosschaert (C‑89/10 and C‑96/10, EU:C:2011:555, paragraph 47).
28      Judgments of 14 May 2020, B and Others (Vertical and horizontal tax integration) (C‑749/18, EU:C:2020:370, paragraph 68), of 8 September 2011, Q-Beef and Bosschaert
(C‑89/10 and C‑96/10, EU:C:2011:555, paragraph 51), and of 15 April 2010, Barth (C‑542/08, EU:C:2010:193, paragraph 33).
29      Judgments of 14 May 2020, B and Others (Vertical and horizontal tax integration) (C‑749/18, EU:C:2020:370, paragraph 69),
of 25 November 2010, Fuß (C‑429/09, EU:C:2010:717, paragraph 77), of 24 March 2009, Danske Slagterier
(C‑445/06, EU:C:2009:178, paragraph 62), and of 8 March 2001, Metallgesellschaft and Others (C‑397/98 and C‑410/98, EU:C:2001:134, paragraphs 104 to 106).
30      See in this regard the judgments of 25 November 2010, Fuß (C‑429/09, EU:C:2010:717,
paragraph 81), and of 8 March 2001, Metallgesellschaft and Others (C‑397/98 and C‑410/98, EU:C:2001:134, paragraph 104).
31      Judgment of 14 May 2020, B and Others (Vertical and horizontal tax integration) (C‑749/18, EU:C:2020:370, paragraph 55 et seq.).
32      See to this effect judgment of 8 March 2001, Metallgesellschaft and Others (C‑397/98 and C‑410/98, EU:C:2001:134, paragraph 104).
33      See to this effect judgment of 25 November 2010, Fuß (C‑429/09, EU:C:2010:717, paragraphs 80 and 81).
34      See expressly to this effect judgment of 24 March 2009, Danske Slagterier (C‑445/06, EU:C:2009:178, paragraph 65).