Inspecteur van de Belastingdienst/Noord/kantoor Groningen and Others v SCA Group Holding BV and Others.
Date: 2014-06-12
20. Freedom of establishment, which Article 49 TFEU grants to European Union 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 where 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 (Case C‑80/12 Felixstowe Dock and Railway Company and Others  EU:C:2014:200, paragraph 17 and the case-law cited).
21. The possibility granted by Netherlands law to resident parent companies and their resident subsidiaries to be taxed as if they formed one and the same tax entity, that is to say, to be subject to a tax integration scheme, constitutes a cash-flow advantage for the companies concerned. That scheme allows, in particular, the profits and losses of the companies constituting the tax entity to be consolidated at the level of the parent company and the transactions carried out within the group to remain neutral for tax purposes (see Case C‑337/08 X Holding  EU:C:2010:89, paragraph 18).
27. Inasmuch as, from a taxation perspective, they put cross-border situations at a disadvantage compared with domestic situations, the provisions of the Law on corporation tax of 1969 at issue in the main proceedings thus constitute a restriction which is, in principle, prohibited by the provisions of the FEU Treaty relating to freedom of establishment ( Papillon  EU:C:2008:659, paragraph 32).
Justification for the restriction
28. In order for such a difference in treatment to be compatible with the provisions of the Treaty on freedom of establishment, it must either relate to situations which are not objectively comparable — in which case the comparability of a cross-border situation with an internal situation must be examined having regard to the aim pursued by the national provisions at issue — or be justified by an overriding reason in the public interest (see, to this effect, Felixstowe Dock and Railway Company and Others  EU:C:2014:200, paragraph 25 and the case-law cited).
29. As regards comparability, the provisions of the Law on corporation tax of 1969 at issue in the main proceedings aim to treat, as far as possible, a group constituted by a parent company with its subsidiaries and its sub-subsidiaries in the same way as an undertaking with a number of establishments, by enabling the results of all those companies to be consolidated for tax purposes.
30. That objective can be attained both in the situation of a parent company which is resident in a Member State and holds sub-subsidiaries also resident in that State through a subsidiary which is itself resident, and in the situation of a parent company which is resident in the same Member State and holds sub-subsidiaries also resident in that State, but through one or more subsidiaries established in another Member State (see, to this effect, Papillon  EU:C:2008:659, paragraph 29).
31. Those two situations are therefore objectively comparable to the extent that the benefit of the advantages of the tax entity regime is sought in both situations for the group formed by the parent company and the sub-subsidiaries.
33. On this point, it should be recalled that although the Court has held that the need to preserve the coherence of a tax system may justify a restriction on the exercise of the fundamental freedoms guaranteed by the Treaty, it is however necessary, for such a justification to be accepted, that a direct link be established between the granting of the tax advantage concerned and the offsetting of that advantage by a particular tax (see, inter alia, Case C‑181/12 Welte  EU:C:2013:662, paragraph 59 and the case-law cited).
34. It is true that the Court accepted in Papillon  (EU:C:2008:659) that, in principle, such a direct link exists between, on the one hand, the possibility of transferring losses between the companies of a group and, on the other hand, the neutralisation of certain transactions between those companies, such as provisions for doubtful claims or risks, waivers of debt, subsidies, provisions for depreciation of shares and the transfer of fixed assets. In that judgment, the Court relied on the fact that, in the tax system of the Member State at issue in that case, the purpose of neutralising those intra-group transactions was to avoid the double use of losses at the level of resident companies falling under the tax integration regime, and thus preserve the coherence of that tax system ( Papillon  EU:C:2008:659, paragraphs 6 and 43 to 50).
35. If the legislation of the Member State at issue in Papillon  (EU:C:2008:659) had granted the benefit of tax integration where the intermediate company was not resident, it would have been possible for a loss suffered by a resident sub-subsidiary to be taken into account in the first instance with respect to the resident parent company, as a result of the tax integration, and in the second instance with respect to the non-resident intermediate subsidiary, as a result of the reduction of value stemming from the same losses on its shares in the sub-subsidiary or its claims against it. That reduction of value would have not been neutralised since the neutralising transactions could not apply to the non-resident intermediate company.
42. Moreover, although the Netherlands Government sought to justify the restriction at issue in the main proceedings on the ground of the risk of tax avoidance, it is settled case-law that that ground does not constitute, by itself, an autonomous justification for a tax restriction on freedom of establishment if it is not relied on in conjunction with a specific objective of combatting wholly artificial arrangements which do not reflect economic reality and the purpose of which is to escape the tax normally due (see, to this effect, inter alia Case C‑264/96 ICI EU:C:1998:370, paragraph 26, and Case C‑196/04 Cadbury Schweppes and Cadbury Schweppes Overseas  EU:C:2006:544, paragraph 55). Evidently, that is not the objective of the restriction provided for in the tax entity regime.
45. It should be borne in mind that, 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 all meaning. Freedom of establishment aims 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 (see Case C‑374/04 Test Claimants in Class IV of the ACT Group Litigation  EU:C:2006:773, paragraph 43; Case C‑170/05 Denkavit Internationaal and Denkavit France  EU:C:2006:783, paragraph 22; and Case C‑284/06 Burda  EU:C:2008:365, paragraph 77).
46. A tax entity regime such as that at issue in the main proceedings constitutes a tax advantage for the companies concerned. By speeding up the relief of the losses of loss-making companies by allowing them to be set off immediately against the profits of other group companies, that regime confers a cash advantage on the group (Case C‑446/03 Marks & Spencer  EU:C:2005:763, paragraph 32).
48. Inasmuch as, from a taxation perspective, they put Community situations at a disadvantage compared with purely domestic situations, the provisions of the Law on corporation tax of 1969 at issue in the main proceedings thus constitute a restriction which is, in principle, prohibited by the provisions of the Treaty relating to freedom of establishment ( Papillon  EU:C:2008:659, paragraph 32).