CELEX: 62013CC0172
Language: en
Date: 2014-10-23 00:00:00
Title: Opinion of Advocate General Kokott delivered on 23 October 2014. # European Commission v United Kingdom of Great Britain and Northern Ireland. # Failure of a Member State to fulfil obligations - Article 49 TFEU - Article 31 of the EEA Agreement - Corporation tax - Groups of companies - Group relief - Transfer of losses sustained by a non-resident subsidiary - Conditions - Date to be used for determining whether the losses of the non-resident subsidiary are definitive. # Case C-172/13.

OPINION OF ADVOCATE GENERAL
      KOKOTT
      delivered on 23 October 2014 (
            1
         )
      
         Case C‑172/13
      
      
         European Commission
      
      
         v
      
      
         United Kingdom of Great Britain and Northern Ireland,
      
      
         supported by
      
      
         Federal Republic of Germany
      
      
         Kingdom of Spain
      
      
         Kingdom of the Netherlands
      
      
         Republic of Finland
      
      ‛Tax law — Freedom of establishment — Article 49 TFEU and Article 31 of the EEA Agreement — National corporation tax — Group taxation — Group relief — Loss relief for foreign group members — ‘Marks & Spencer exception’ — Time at which it is determined that there is no possibility for losses to be taken into account elsewhere in the future’
      I – Introduction
      
      
               1.
            
            
               The present Treaty-infringement proceedings concern, once again, the interpretation of the judgment in Marks & Spencer. (
                     2
                  ) In that judgment, using the example of United Kingdom law, the Court set out the conditions under which the Member States’ laws governing taxes on income must also permit cross-border group relief, the so-called ‘Marks & Spencer exception’.
            
         
               2.
            
            
               Those conditions, unfortunately, are anything but clear. This has been shown not only by the cases in which the Court has had to deal with their application in specific circumstances. (
                     3
                  ) In addition, both Advocate General Geelhoed and Advocate General Mengozzi have stated that they consider the scope and the purpose of the Marks & Spencer exception to be unclear. (
                     4
                  ) That view is shared not only by me (
                     5
                  ) but also by many legal authors, who advocate a very wide range of interpretations of the Marks & Spencer exception. (
                     6
                  )
            
         
               3.
            
            
               It is not surprising, therefore, that the European Commission and the United Kingdom of Great Britain and Northern Ireland also do not agree on the correct implementation of the judgment in Marks & Spencer, even though that judgment now dates back almost nine years.
            
         II – Legislative framework
      
      
               4.
            
            
               The United Kingdom levies a tax on the incomes of legal persons. Within groups of the European Economic Area there is the possibility to transfer a loss incurred by a group member in an accounting period to another group member so that the latter can offset the third-party loss against its own income (‘group relief’).
            
         
               5.
            
            
               If, however, the loss is incurred by a group member established in another Member State of the European Union or in an EFTA State belonging to the European Economic Area, group relief is subject to special conditions which are laid down, for the relevant period, in section 111 et seq. of the Corporation Tax Act 2010 (CTA 2010). Those conditions include, under section 119(2) of CTA 2010, the condition that neither the foreign group member nor any other taxpayer has the possibility of offsetting such a loss against any future income within the framework of its foreign taxation in accounting periods after the tax year in which the loss was suffered. The existence of that possibility must be determined, under section 119(4) of CTA 2010, as at the time immediately after the end of the tax year in which the loss was suffered.
            
         III – Background to the dispute and procedure before the Court
      
      
               6.
            
            
               The United Kingdom had introduced group relief in regard to foreign group members — initially by amending the Income and Corporation Taxes Act 1988 with effect from 1 April 2006 — in order to comply with the conditions relating to the freedom of establishment laid down by European Union law. These had been inferred by the United Kingdom from the judgment in Marks & Spencer, which was delivered on 13 December 2005. In that judgment the Court ruled: (
                     7
                  )
               ‘As Community law now stands, Articles 43 EC and 48 EC do not preclude provisions of a Member State which generally prevent a resident parent company from deducting from its taxable profits losses incurred in another Member State by a subsidiary established in that Member State although they allow it to deduct losses incurred by a resident subsidiary. However, it is contrary to Articles 43 EC and 48 EC to prevent the resident parent company from doing so where the non-resident subsidiary has exhausted the possibilities available in its State of residence of having the losses taken into account for the accounting period concerned by the claim for relief and also for previous accounting periods and where there are no possibilities for those losses to be taken into account in its State of residence for future periods either by the subsidiary itself or by a third party, in particular where the subsidiary has been sold to that third party.’
            
         
               7.
            
            
               The Commission had doubts as to the compatibility of the new United Kingdom rules with the judgment in Marks & Spencer and, by letter of 19 July 2007, gave the United Kingdom an opportunity to comment in this regard. In its reasoned opinion of 23 September 2008, it alleged that the United Kingdom had acted contrary to the freedom of establishment. In particular, the breach resided in the fact that the possibility of obtaining future relief elsewhere had to be assessed at the end of each accounting period and the new rules were not applicable before 1 April 2006. On 25 November 2010 a supplementary reasoned opinion was sent in the light of the recently enacted CTA 2010, which essentially reproduced the previously contested provisions of the Income and Corporation Taxes Act 1988 without modification.
            
         
               8.
            
            
               After the United Kingdom had failed to comply with the Commission’s request to amend its legislation within the prescribed period of two months, on 5 April 2013 the Commission brought an action before the Court, pursuant to the second paragraph of Article 258 TFEU, in which it claims that the Court should:
               
                        —
                     
                     
                        declare that, by imposing conditions on cross-border group relief that make it virtually impossible in practice to obtain such relief and by restricting such relief to periods after 1 April 2006, the United Kingdom has failed to comply with its obligations under Article 49 TFEU and Article 31 of the EEA Agreement; and
                     
                  
                        —
                     
                     
                        order the United Kingdom to pay the costs.
                     
                  
         
               9.
            
            
               The United Kingdom contends that the Court should:
               
                        —
                     
                     
                        dismiss the Commission’s application; and
                     
                  
                        —
                     
                     
                        order the Commission to pay the costs.
                     
                  
         
               10.
            
            
               The Federal Republic of Germany, the Kingdom of Spain, the Kingdom of the Netherlands and the Republic of Finland were granted leave to intervene. They are supporting the form of order sought by the defendant.
            
         
               11.
            
            
               The parties and the interveners first submitted written observations and also presented oral argument on 15 July 2014.
            
         IV – Assessment
      
      
               12.
            
            
               The Commission alleges that the United Kingdom has acted contrary to the freedom of establishment under both the TFEU and the EEA Agreement. In this regard it raises two pleas in law.
            
         
               13.
            
            
               Article 49 TFEU, in conjunction with Article 54 TFEU, and Article 31, in conjunction with Article 34, of the EEA Agreement in principle prohibit restrictions on the freedom of establishment in an identical manner. (
                     8
                  ) For that reason I will not draw any distinction between those provisions in the examination of the pleas in law.
            
         A – The first plea in law: virtual impossibility of obtaining cross-border group relief
      
      
               14.
            
            
               By its first plea in law, the Commission considers that the freedom of establishment is infringed because the possibility of obtaining cross-border group relief is virtually impossible under United Kingdom law.
            
         
               15.
            
            
               The Commission observes that, according to the judgment in Marks & Spencer, cross-border group relief is not required in principle by European Union law. Nevertheless, an exception applies in the case where losses incurred by a foreign subsidiary within the framework of foreign taxation cannot be taken into account either for past or for future tax years. However, section 119(4) of CTA 2010 provides that, at the time immediately after the end of the accounting period in which the loss was suffered, it must be determined whether there is no possibility of future loss relief elsewhere. According to the Commission, such a determination, however, can be made at that moment only if either the State of residence of the subsidiary does not permit loss carry-forward or if the subsidiary enters into liquidation in the tax year in which the loss is suffered. Thus, the possibility of relief is excluded in particular in the case where the subsidiary ceases trading after the tax year in which the loss was suffered. Under the rules, only the loss in respect of a single accounting period may therefore be transferred. According to the judgment in Marks & Spencer, however, the possibility of obtaining loss relief in future accounting periods elsewhere is to be assessed only at the time when the claim for group relief is made.
            
         
               16.
            
            
               The United Kingdom contends that cross-border group relief is not virtually impossible. The conditions are indeed restrictive, but this is a consequence solely of the Court’s case-law. In particular, according to that case-law, the possibility of having a loss taken into account elsewhere must be tested at the end of the accounting period. This does not, however, preclude the test from taking into consideration the ceasing of trading or an intention imminently to wind up a company that exists at the end of an accounting period. Furthermore, if a test were applied only at the date of the claim for group relief, a taxpayer could, contrary to the case-law, choose the Member State in which its losses are to be taken into account. It would then be able, before making such a claim, to arrange its affairs in such a way that, at the time when it makes the claim, it no longer has any possibility of relief elsewhere.
            
         
               17.
            
            
               In my view, first of all, the first plea in law is ambiguous. The Commission criticises the United Kingdom on the ground that under section 119(4) of CTA 2010 relief is possible only if either the State of residence of the subsidiary does not permit loss carry-forward or the subsidiary enters into liquidation in the tax year in which the loss is suffered. Because the latter case in particular undoubtedly occurs in practice, it is ultimately not the Commission’s contention that cross-border relief is virtually impossible under United Kingdom law, but that not all cases which are, in its view, required by the freedom of establishment are covered.
            
         
               18.
            
            
               It is therefore necessary to examine, in the context of the first plea in law, whether section 119(4) of CTA 2010 breaches the freedom of establishment because, under that provision, cross-border relief is not permitted to a sufficient degree on account of the time at which the test of the possibility of future loss relief elsewhere takes place. It must also be clarified that, according to the Commission’s submissions, the action is, first, directed only at the ability to transfer losses of a non-resident subsidiary, but not of other group members, and that, second, the action concerns only losses from foreign activity, but not losses generated by a non-resident subsidiary in the United Kingdom through a permanent establishment. (
                     9
                  )
            
         1. Restriction of the freedom of establishment
      
               19.
            
            
               The contested rules restrict the freedom of establishment because they impose stricter requirements on claiming the advantages of group relief if a parent company establishes a subsidiary abroad than if it does so in its State of residence. (
                     10
                  )
            
         
               20.
            
            
               This restriction affects two advantages of group relief, which should be distinguished for the purposes of further examination. First of all, there is a cash flow advantage because group relief speeds up the relief of losses within a group. (
                     11
                  ) Provided that the group members continue to generate profits, because of the possibilities of group relief, ceteris paribus, a group in the United Kingdom will not pay less tax, but will pay it later, as transferring the loss incurred by a subsidiary to the parent company also means that the subsidiary no longer has available any loss carry-forward which can be offset against its own future taxable profits. The parent company’s reduced tax for one accounting period will therefore be offset by the subsidiary’s higher tax in a future accounting period.
            
         
               21.
            
            
               There is, however, a second, more significant advantage of group relief. Where, on balance across all the accounting periods for its activity, the subsidiary makes only a loss (‘total loss’), group relief goes beyond being a mere cash flow advantage. In this case, on the basis of the loss relief, the parent company does not pay any tax on its income to the amount of the total loss incurred by its subsidiary, and this is definitive. The same situation exists where the subsidiary does not collapse economically, but its loss carry-forward is limited by law and, for that reason, losses incurred by it are not subject to tax relief.
            
         
               22.
            
            
               According to settled case-law, the restriction of the freedom of establishment by section 119(4) of CTA 2010 is permissible only if it relates to situations which are not objectively comparable (see section 2 immediately below) or if it is justified by an overriding reason in the public interest (
                     12
                  ) (see section 3).
            
         2. Objective comparability of the situations
      
               23.
            
            
               It must therefore be clarified, first of all, whether the situation of a parent company with a resident subsidiary whose losses are to be transferred by way of group relief is objectively comparable to the situation of a parent company with a non-resident subsidiary whose losses are to be handled in the same way. This is doubtful because, in principle, the United Kingdom taxes the activity only of a resident subsidiary, but not of a non-resident subsidiary.
            
         
               24.
            
            
               The Court had found in this regard in Marks & Spencer that the fact that a Member State does not tax the activity of non-resident subsidiaries, in contrast to resident subsidiaries, does not in itself justify restricting group relief solely to losses incurred by resident companies. (
                     13
                  )
            
         
               25.
            
            
               This finding is called into question, however, by the recent judgment in Nordea Bank Danmark, which concerned cross-border relief for losses incurred by non-resident permanent establishments. In that judgment, the Court set out, for the first time, the principle that, in relation to measures laid down by a Member State in order to prevent double taxation, non-resident and resident permanent establishments are not in a comparable situation. Although the Court in the end accepted the objective comparability of the situations, it did so only because the Member State concerned had decided also to make non-resident permanent establishments subject to tax. (
                     14
                  )
            
         
               26.
            
            
               In the light of these statements relating to permanent establishments, it seems reasonable to assume, by way of an argumentum a fortiori, that resident and non-resident subsidiaries are not at all in a comparable situation having regard to the allocation of the power to impose taxes between Member States. Whilst, in accordance with the internationally recognised principle of taxing companies on their worldwide profits, (
                     15
                  ) a non-resident permanent establishment is still subject to the fiscal sovereignty of the State in which the company is established and may be taxed by that State, that is not the case, in principle, for a company’s non-resident subsidiaries. These are subject to tax in the State in which the parent company is established solely on the basis of their domestic activity and, if appropriate, in the context of exceptional add-back taxation with a view to combatting abuse. (
                     16
                  ) These exceptional cases, however, do not form the subject-matter of the present action.
            
         
               27.
            
            
               The principle set out in Nordea Bank Danmark is also particularly important because I had previously proposed that the Court abandon entirely the test of the objective comparability of situations. (
                     17
                  ) That principle effectively means that a Member State must take into account losses from foreign activity only if it also taxes that activity. This is consistent both with the case-law on loss relief prior to the judgment in Marks & Spencer and with the case-law in other areas of tax law. First of all, as early as 1997, the Court found in its judgment in Futura Participations and Singer that taking into account for tax purposes only domestic losses incurred by the permanent establishment of a foreign company is in conformity with the fiscal principle of territoriality and does not therefore constitute discrimination. (
                     18
                  ) Second, only recently the judgment in Kronos International made clear, with regard to the taxation of dividends, that resident and non-resident subsidiaries are not in a comparable situation for the purposes of taking into account a tax on the distribution of dividends if the Member State does not tax the distribution of dividends from non-resident subsidiaries. (
                     19
                  )
            
         
               28.
            
            
               In addition, it is settled case-law that the objective comparability of situations must be assessed having regard to the aim pursued by the provisions at issue. (
                     20
                  ) The aim of group taxation regimes is to allow the companies in a group — to differing degrees — to be taxed as if they constituted one and the same taxpayer. (
                     21
                  ) In the light of that aim too, the objective comparability of losses incurred by resident and non-resident subsidiaries seems doubtful. It seems inappropriate to treat a resident parent company and a non-resident subsidiary as one and the same taxpayer in so far as the non-resident subsidiary is not subject to domestic taxation at all and, as such, is not a taxpayer itself.
            
         
               29.
            
            
               I am nevertheless not suggesting that the objective comparability of situations should be rejected in the present case. The test of the objective comparability of the situations was intended only to weed out cases of unequal treatment which manifestly and unequivocally takes place for good reason. The highlighted difference in the situation of a parent company with a resident or a non-resident subsidiary is certainly significant, if not crucial for the purpose of examining a breach of the freedom of establishment. However, it is not evident that it precludes such a breach, as is shown by the contrary view taken by the Court in Marks & Spencer. That difference must therefore be examined as a possible justification for unequal treatment, including a test of the proportionality of the national rules.
            
         3. Justification
      
               30.
            
            
               It is thus necessary to examine whether the restrictive condition for loss relief with non-resident subsidiaries is justified by an overriding reason in the public interest.
            
         
               31.
            
            
               The fact that the foreign activity of non-resident subsidiaries in the United Kingdom is not subject to tax constitutes such a justification. According to now established case-law, a Member State is in principle required to take into account a loss from foreign activity only if it also taxes that activity, whether the Court now describes this as ‘ensuring the cohesion of the tax system’, (
                     22
                  )‘preservation of the allocation of the power to impose taxes between Member States’, (
                     23
                  )‘safeguarding the symmetry’ between taxation of profits and deduction of losses, (
                     24
                  ) preventing ‘losses being used twice’ (
                     25
                  ) or preventing ‘tax avoidance’. (
                     26
                  ) (
                     27
                  ) This case-law is further reinforced by the Court’s statements regarding the objective comparability of situations which, as I have explained, (
                     28
                  ) attach crucial importance to the issue of whether or not a Member State taxes a foreign activity.
            
         
               32.
            
            
               The United Kingdom is thus justified in principle in not only imposing stricter requirements for taking account of losses resulting from the foreign activity of foreign subsidiaries in group relief, but in excluding them entirely from that regime.
            
         
               33.
            
            
               Nevertheless, the United Kingdom must also comply with the principle of proportionality. Under that principle, Member States must employ means which, whilst enabling them effectively to attain the objectives pursued by their domestic laws, cause the least possible detriment to the objectives and principles laid down by the relevant European Union legislation. (
                     29
                  )
            
         
               34.
            
            
               In this respect, the Court found in Marks & Spencer that a complete exclusion of non-resident subsidiaries from group relief goes beyond what is necessary to attain ‘the essential part of’ the objectives pursued, thereby creating the Marks & Spencer exception. (
                     30
                  ) According to that exception — to put it briefly — losses incurred by a non-resident subsidiary can be transferred to the parent company if those losses cannot be taken into account elsewhere, either for present, past or future accounting periods, in which connection the burden of proof lies with the taxpayer and the Member States are entitled to prevent abuse of that exception. (
                     31
                  )
            
         
               35.
            
            
               The first plea in law now concerns the question whether the contested United Kingdom derogation for the transfer of losses incurred by non-resident subsidiaries satisfies these proportionality criteria in so far as that derogation considers, under section 119(4) of CTA 2010, the circumstances at the end of the respective period in which the loss was suffered to be crucial in assessing the possibility of future loss relief.
            
         a) The case-law on the Marks & Spencer exception
      
               36.
            
            
               This question cannot be answered on the basis of the Court’s existing case-law.
            
         
               37.
            
            
               The judgment in Marks & Spencer does not itself indicate either the cases in which a possibility of future loss relief is precluded or the time at which this is to be determined. On the one hand, the ruling could have been guided by the principle of not permitting a parent company to obtain the cash flow advantage of group relief, but allowing that ultimate advantage of loss offset in the case of a total loss of the subsidiary. (
                     32
                  ) On this interpretation, the rules here at issue would be contrary to the judgment in Marks & Spencer, as it would be impractical to identify a subsidiary’s total loss because this can be determined only at the end of its activity on the basis of all accounting periods. On the other hand, the judgment does not contain any statement on taking into account a total loss. On the contrary, the Court considered that the freedom of establishment was restricted solely as a result of the refusal of the cash flow advantage. (
                     33
                  )
            
         
               38.
            
            
               Moreover, the Court’s subsequent case-law has narrowed the scope of the Marks & Spencer exception so much that I find it very difficult to identify any cases in which it might apply. This is illustrated by the Commission’s first complaint. The Commission claims that the United Kingdom rules are too restrictive because they permit cross-border relief only if either the State of residence of the subsidiary does not permit loss carry-forward or if the subsidiary enters into liquidation in the tax year in which the loss is suffered. Both parties to the present case appear to agree that in these two cases at least the Marks & Spencer exception is satisfied. However, according to the Court’s most recent case-law, that is not so.
            
         
               39.
            
            
               First, it follows from the judgment in K that a Member State is not required to take into account losses from a non-resident activity if taking the losses into account at the place where the activity took place is precluded by law. (
                     34
                  ) If a non-resident subsidiary is thus prevented from carrying forward a loss under the law of its State of residence, so there is no longer any possibility of future loss relief there, the fundamental freedoms nevertheless do not require the loss to be transferred to the parent company. Here we can see the influence of a line of case-law which developed only after Marks & Spencer. The Court summarised this line of case-law for the first time in its judgment in Krankenheim Ruhesitz am Wannsee-Seniorenheimstatt to the effect that a Member State is not required to compensate, for the purposes of applying its tax law, negative results arising from ‘particularities’ of tax legislation of another Member State. (
                     35
                  ) Admittedly, it has not yet been definitively clarified in which cases a Member State’s tax legislation is to be regarded as particular in this regard, for example because it departs from a European Union standard for loss carry-forward which is still to be defined. However, the German Bundesfinanzhof, for example, has already interpreted this case-law as meaning that any legal restrictions on loss carry-forward do not make it impossible to have the losses taken into account elsewhere in the sense of the Marks & Spencer exception. (
                     36
                  )
            
         
               40.
            
            
               Second, in A the Court took the view that the liquidation of a subsidiary which had essentially ceased trading was not sufficient in itself to support the assumption that there was no longer any possibility of relief for it in its State of residence. It is understood to be also the position in the case of a merger operation by which the subsidiary even loses its legal personality. By contrast, it would seem to be sufficient, in order to accept that there is still a possibility for losses to be taken into account in the State of residence, that in the event that the subsidiary would not be liquidated it still had some — albeit very limited — income. (
                     37
                  ) Ceasing trading is not therefore sufficient in itself to satisfy the Marks & Spencer exception if some income is still being generated. Yet this is precisely the situation both with the voluntary liquidation of a subsidiary and with the initiation of insolvency proceedings in respect of its assets, as income is still generated, as a rule, when the company’s assets are liquidated. According to the judgment in A, the Marks & Spencer exception does not therefore clearly apply if the subsidiary enters into liquidation, or indeed if it subsequently loses legal personality.
            
         
               41.
            
            
               The first plea in law can thus be assessed only if, having regard to the principle of proportionality in the context of the present case, the Court clarifies whether the Marks & Spencer exception still applies and, if so, what substance it has.
            
         b) Review of the Marks & Spencer exception
      
               42.
            
            
               On the basis of the common-law principle of stare decisis et non quieta movere, the past case-law ought, in principle, to be followed. The judgment in Marks & Spencer has not, however, brought about quieta, as it has consistently remained unclear with regard to its effects. (
                     38
                  ) Consequently, I take the view that a review as to the appropriateness of the Marks & Spencer exception is both possible and necessary. (
                     39
                  )
            
         
               43.
            
            
               By creating that exception in its judgment in Marks & Spencer, the Court wished to fill a gap. It considered that it was the duty of the European Union legislature to regulate cross-border relief in a manner consistent with the fundamental freedoms. (
                     40
                  ) Up to that point, the advantages of group relief were intended to benefit cross-border groups, at least to some extent, where all other possibilities for taking losses into account were closed to them.
            
         
               44.
            
            
               That regime has, however, proved to be impracticable. It therefore does not protect the interests of the internal market and, as such, is also not a less onerous means of guaranteeing the fiscal sovereignty of Member States as it does not facilitate the activity of cross-border groups but rather constitutes a virtually inexhaustible source of legal disputes between taxpayers and the Member States’ tax administrations. There are essentially four reasons for this.
            
         
               45.
            
            
               First, the possibility of loss relief elsewhere is in terms of fact really precluded only if the subsidiary has ceased to exist in law. Only if it possesses no assets and can no longer acquire any assets is it ensured that no further profits can be generated against which losses can still be offset. However, in some cases it may take a long time for a subsidiary to be fully wound up. This can explain the attempts to bring forward that moment to the point when the company ceases trading or enters into liquidation, although the consequence of this is the provisional determination that it is impossible to take losses into account elsewhere. This is illustrated particularly clearly by the proposal made by the Commission in the present case that profits subsequently generated by the subsidiary against all expectations be incorporated in the parent company’s profits by way of a correction and by the Commission’s distinction between ‘real’ and ‘theoretical’ possibilities for relief elsewhere. Whilst in Marks & Spencer the Court has already rejected the correction procedure proposed by the Commission, (
                     41
                  ) a distinction between ‘real’ and ‘theoretical’ possibilities only leads to considerations of probability which, by their nature, do not provide legal certainty.
            
         
               46.
            
            
               Second, in the case in which the loss cannot by law be taken into account in the State in which the subsidiary is established, the Marks & Spencer exception comes into conflict with another line of case-law. Although, for example, the legal exclusion of the loss carry-forward in the State in which the subsidiary is established would necessarily appear to be a clear case for the application of the Marks & Spencer exception, this is, as has been seen, at variance, in the Court’s view, with a principle which has developed in the settled case-law after the judgment in Marks & Spencer. (
                     42
                  )
            
         
               47.
            
            
               Third, the impossibility of loss relief elsewhere can be created arbitrarily by the taxpayer. This possibility, however, runs counter to the case-law also cited by the United Kingdom, according to which a taxpayer does not have the freedom to choose the tax scheme to which he is subject. (
                     43
                  ) In Marks & Spencer the Court had thus already also given the Member States the option to prevent arrangements to evade taxes. (
                     44
                  ) However, it is very difficult to clarify in a specific case when, for example, a subsidiary is wound up for tax reasons and when it is not.
            
         
               48.
            
            
               Fourth, the parent company’s Member State is obliged, on the basis of the freedom of establishment, only to accord equal treatment. For any cross-border relief it would therefore be necessary to determine in retrospect what tax results the non-resident subsidiary would have produced had it been established within that Member State. Thus, under some circumstances, a notional tax situation over a period of decades has to be investigated retrospectively.
            
         c) The abandonment of the Marks & Spencer exception
      
               49.
            
            
               A system of relief for losses incurred by non-resident subsidiaries which was practicable for the internal market could only connect their current relief with the incorporation of future profits, as has already been discussed in Marks & Spencer. (
                     45
                  ) Such a solution would offer the parent company both the cash flow advantage and the advantage of relief in respect of the total loss. (
                     46
                  ) However, this solution would result in a broad degree of equal treatment of losses incurred by non-resident and resident subsidiaries. It would thus undermine the principle in established case-law that a Member State is required to take into account a loss from foreign activity only if it also taxes that activity. (
                     47
                  )
            
         
               50.
            
            
               Against this background, the abandonment of the Marks & Spencer exception is the most balanced solution because it preserves that principle of case-law and – in view of the shortcomings of the Marks & Spencer exception which have been outlined – no less onerous means are available in this regard. Moreover, there are three further reasons for abandoning the Marks & Spencer exception.
            
         
               51.
            
            
               First, it resolves contradictions in relation to the Court’s other case-law on tax matters, which provides for a clear demarcation of the fiscal powers of the Member States. In National Grid Indus the Court ruled that a Member State may, in the case where a company has transferred its place of management to another Member State, charge tax on the unrealised increases in the value of that company’s assets and does not have to grant tax relief in respect of losses suffered after that transfer of its place of management as a result of decreases in the value of its assets. This is so even in the case where the other Member State does not take such losses into account, since regard must be had to the symmetry between the right to tax profits and the possibility of deducting losses. (
                     48
                  ) In X Holding the Court acknowledged with equal clarity that the Kingdom of the Netherlands could exclude non-resident subsidiaries, fully and without exception, from a group taxation system which also included relief for losses incurred by a subsidiary. (
                     49
                  )
            
         
               52.
            
            
               Second, this solution respects the requirement of legal certainty, which constitutes a general principle of European Union law. The principle of legal certainty requires, on the one hand, that rules of law be clear and precise and, on the other, that their application be foreseeable by those subject to them. (
                     50
                  ) This must also apply to rules of law stemming from the interpretation of the fundamental freedoms by the Court. As the last few years have shown, the Marks & Spencer exception does not satisfy the requirement of legal certainty, but makes investment conditions unforeseeable and liable to give rise to disputes.
            
         
               53.
            
            
               Third, the abandonment of the Marks & Spencer exception also does not infringe the ability-to-pay principle, as the Commission claimed at the hearing. The present case concerns the notional treatment of different taxpayers as one and the same taxpayer. However, parent companies and subsidiaries are not jointly taxed, in principle, because they are separate legal entities each with its own ability to pay. At least, the subsidiary does not have access to the assets of the parent company. Accordingly, I consider that a group taxation system is not necessary a priori for reasons relating to the ability to pay.
            
         d) Conclusion
      
               54.
            
            
               Consequently, even the complete refusal of loss relief for a non-resident subsidiary satisfies the principle of proportionality. Any restriction on cross-border relief in respect of a subsidiary is thus justified by ensuring the cohesion of a tax system or the allocation of the power to impose taxes between Member States. (
                     51
                  )
            
         4. Conclusion on the first plea in law
      
               55.
            
            
               As the contested United Kingdom rules on group relief go even further than is required by European Union law in that they provide for cross-border relief in certain cases, they are not contrary to the freedom of establishment. The first plea in law must therefore be rejected.
            
         B – The second plea in law: temporal restriction of cross-border group relief
      
      
               56.
            
            
               As a second plea in law, the Commission argues that the temporal restriction of the possibility of cross-border group relief to losses suffered after 1 April 2006 is contrary to the freedom of establishment.
            
         
               57.
            
            
               The second plea in law should also be rejected because the United Kingdom was not obliged under European Union law to amend its legislation on group relief at all.
            
         C – Conclusion and costs
      
      
               58.
            
            
               The action must therefore be dismissed in its entirety because neither of the pleas in law is justified.
            
         
               59.
            
            
               The costs to be borne by the parties should be decided pursuant to Article 138(1) of the Rules of Procedure and the costs to be borne by the interveners should be decided pursuant to Article 140(1) of those Rules.
            
         V – Conclusion
      
      
               60.
            
            
               I accordingly propose that, in the action brought by the Commission against the United Kingdom, the Court should:
               
                        (1)
                     
                     
                        dismiss the action;
                     
                  
                        (2)
                     
                     
                        order the European Commission to pay the costs;
                     
                  
                        (3)
                     
                     
                        order the Federal Republic of Germany, the Kingdom of Spain, the Kingdom of the Netherlands and the Republic of Finland to bear their own respective costs.
                     
                  
         (
            1
         )	Original language: German.
      (
            2
         )	Marks & Spencer (C‑446/03, EU:C:2005:763).
      (
            3
         )	See, in particular, Lidl Belgium (C‑414/06, EU:C:2008:278), A (C‑123/11, EU:C:2013:84) and K (C‑322/11, EU:C:2013:716). See also the pending proceedings in Timac Agro Deutschland (C‑388/14).
      (
            4
         )	See the Opinion of Advocate General Geelhoed in Test Claimants in Class IV of the ACT Group Litigation (C‑374/04, EU:C:2006:139, point 65) and the Opinion of Advocate General Mengozzi in K (C‑322/11, EU:C:2013:183, points 87 and 88).
      (
            5
         )	See my Opinion in A (C‑123/11, EU:C:2012:488, points 47 to 60).
      (
            6
         )	The Court has to date registered 142 academic publications which deal directly with the judgments mentioned; see the case-law data base under curia.europa.eu.
      (
            7
         )	Marks & Spencer (C‑446/03, EU:C:2005:763, operative part).
      (
            8
         )	See A (C‑48/11, EU:C:2012:485, paragraph 21 and the case-law there cited).
      (
            9
         )	See, with regard to losses of a permanent establishment, Philips Electronics (C‑18/11, EU:C:2012:532).
      (
            10
         )	See ICI (C‑264/96, EU:C:1998:370, paragraphs 20 to 23), Marks & Spencer (C‑446/03, EU:C:2005:763, paragraphs 28 to 34), and Felixstowe Dock and Railway Company
         and Others (C‑80/12, EU:C:2014:200, paragraphs 17 to 21).
      (
            11
         )	See Marks & Spencer (C‑446/03, EU:C:2005:763, paragraph 32) and Felixstowe Dock and Railway Company and Others (C‑80/12, EU:C:2014:200, paragraph 19).
      (
            12
         )	See, inter alia, Nordea Bank Danmark (C‑48/13, EU:C:2014:2087, paragraph 23 and the case-law cited).
      (
            13
         )	See Marks & Spencer (C‑446/03, EU:C:2005:763, paragraph 40); also, based on that judgment, A (C‑123/11, EU:C:2013:84, paragraphs 34 and 35).
      (
            14
         )	See Nordea Bank Danmark (C‑48/13, EU:C:2014:2087, paragraph 24).
      (
            15
         )	See Marks & Spencer (C‑446/03, EU:C:2005:763, paragraph 39).
      (
            16
         )	See Cadbury Schweppes and Cadbury Schweppes Overseas (C‑196/04, EU:C:2006:544).
      (
            17
         )	See my Opinion in Nordea Bank Danmark (C‑48/13, EU:C:2014:153, points 21 to 28).
      (
            18
         )	Futura Participations and Singer (C‑250/95, EU:C:1997:239, paragraphs 21 and 22).
      (
            19
         )	See Kronos International (C‑47/12, EU:C:2014:2200, paragraph 81).
      (
            20
         )	See, inter alia, X Holding (C‑337/08, EU:C:2010:89, paragraph 22) and SCA Group Holding and Others (C‑39/13, C‑40/13 and C‑41/13, EU:C:2014:1758, paragraph 28).
      (
            21
         )	See, with regard to the Netherlands ‘fiscale eenheid’, SCA Group Holding and Others (C‑39/13, C‑40/13 and C‑41/13, EU:C:2014:1758, paragraph 51).
      (
            22
         )	See K (C‑322/11, EU:C:2013:716, paragraphs 64 to 71).
      (
            23
         )	See Marks & Spencer (C‑446/03, EU:C:2005:763, paragraph 45), Lidl Belgium (C‑414/06, EU:C:2008:278, paragraph 31), X Holding (C‑337/08, EU:C:2010:89, paragraph 28), A (C‑123/11, EU:C:2013:84, paragraph 42), K (C‑322/11, EU:C:2013:716, paragraph 55), and Nordea Bank Danmark (C‑48/13, EU:C:2014:2087, paragraph 32).
      (
            24
         )	See National Grid Indus (C‑371/10, EU:C:2011:785, paragraph 58) and Nordea Bank Danmark (C‑48/13, EU:C:2014:2087, paragraph 32 and the case-law cited).
      (
            25
         )	See Marks & Spencer (C‑446/03, EU:C:2005:763, paragraphs 47 and 48), Lidl Belgium (C‑414/06, EU:C:2008:278, paragraphs 35 and 36), and A (C‑123/11, EU:C:2013:84, paragraph 44).
      (
            26
         )	See Marks & Spencer (C‑446/03, EU:C:2005:763, paragraph 49), and A (C‑123/11, EU:C:2013:84, paragraph 45).
      (
            27
         )	See also National Grid Indus (C‑371/10, EU:C:2011:785, paragraph 80) and K (C‑322/11, EU:C:2013:716, paragraph 72), which regard the justifications of tax cohesion and the allocation of the power to impose taxes as at least partially identical.
      (
            28
         )	See above, points 25 to 28.
      (
            29
         )	See, inter alia, BDV Hungary Trading (C‑563/12, EU:C:2013:854, paragraph 30 and the case-law cited).
      (
            30
         )	See Marks & Spencer (C‑446/03, EU:C:2005:763, paragraph 55).
      (
            31
         )	See Marks & Spencer (C‑446/03, EU:C:2005:763, paragraphs 56 and 57).
      (
            32
         )	See above, points 20 and 21.
      (
            33
         )	See Marks & Spencer (C‑446/03, EU:C:2005:763, paragraph 32).
      (
            34
         )	See K (C‑322/11, EU:C:2013:716, paragraph 76 to 81).
      (
            35
         )	See Krankenheim Ruhesitz am Wannsee-Seniorenheimstatt (C‑157/07, EU:C:2008:588, paragraph 49), which was based on Columbus Container Services (C‑298/05, EU:C:2007:754, paragraph 51) and Deutsche Shell (C‑293/06, EU:C:2008:129, paragraph 42); see also, subsequently, K (C‑322/11, EU:C:2013:716, paragraph 79).
      (
            36
         )	See Bundesfinanzhof, judgments of 9 June 2010, I R 100/09, paragraph 11, and of 9 June 2010, I R 107/09, paragraph 17.
      (
            37
         )	See A (C‑123/11, EU:C:2013:84, paragraphs 51 to 53).
      (
            38
         )	See points 2 and 37 to 40 above.
      (
            39
         )	With regard to such a review of the Court’s case-law, see Keck and Mithouard (C‑267/91 and C‑268/91, EU:C:1993:905, paragraphs 14 to 16).
      (
            40
         )	See Marks & Spencer (C‑446/03, EU:C:2005:763, paragraph 58).
      (
            41
         )	See Marks & Spencer (C‑446/03, EU:C:2005:763, paragraphs 54 to 58).
      (
            42
         )	See point 39 above.
      (
            43
         )	See X Holding (C‑337/08, EU:C:2010:89, paragraphs 29 to 32 and the case-law cited).
      (
            44
         )	See Marks & Spencer (C‑446/03, EU:C:2005:763, paragraph 57).
      (
            45
         )	See Marks & Spencer (C‑446/03, EU:C:2005:763, paragraph 54).
      (
            46
         )	See above, points 20 and 21.
      (
            47
         )	See above, point 31.
      (
            48
         )	National Grid Indus (C‑371/10, EU:C:2011:785, paragraphs 58 and 61).
      (
            49
         )	X Holding (C‑337/08, EU:C:2010:89).
      (
            50
         )	See, inter alia, Ålands Vindkraft (C‑573/12, EU:C:2014:2037, paragraph 127 and the cited case-law).
      (
            51
         )	See point 31 above.