Felixstowe Dock and Railway Company Ltd and Others v The Commissioners for Her Majesty’s Revenue & Customs.
Date: 2014-04-01
17. 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‑307/97 Saint-Gobain ZN  EU:C:1999:438, paragraph 35, and Case C‑446/03 Marks & Spencer EU:C:2005:763, paragraph 30).
19. Relief 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 profits of other group companies, such relief confers a cash-flow advantage on the group ( Marks & Spencer  EU:C:2005:763, paragraph 32).
21. That difference in treatment makes it less attractive in tax terms to establish a link company in another Member State, since the applicable national legislation grants the tax advantage at issue only where link companies are established in the United Kingdom.
23. The Court has already held that a company may, for tax purposes, rely on a restriction of the freedom of establishment of another company which is linked to it in so far as such a restriction affects its own taxation (see, to this effect, Case C‑18/11 Philips Electronics  EU:C:2012:532, paragraph 39).
25. In order for such a difference in treatment to be compatible with the provisions of the FEU Treaty on freedom of establishment, it must either relate to situations which are not objectively comparable — in which case the comparability of a crossborder 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, Philips Electronics  EU:C:2012:532, paragraph 17 and the case-law cited).
30. Whilst the objective of preserving powers of taxation as between the Member States has been recognised as legitimate by the Court (see, inter alia, Case C‑371/10 National Grid Indus  EU:C:2011:785, paragraph 45) in order to safeguard symmetry between the right to tax profits and the right to deduct losses (see Case C‑414/06 Lidl Belgium  EU:C:2008:278, paragraph 33), in a situation such as that at issue in the main proceedings the power of the host Member State, on whose territory the economic activity giving rise to the losses of the consortium company is carried out, to impose taxes is not at all affected by the possibility of transferring, by relief and to a resident company, the losses sustained by another company, since the latter is also resident for tax purposes in that Member State (see, to this effect, Philips Electronics  EU:C:2012:532, paragraphs 25 and 26).
31. A national measure restricting freedom of establishment may also be justified where it is designed to combat wholly artificial arrangements, aimed at circumventing the legislation of the Member State concerned (see, to this effect, Case C‑264/96 ICI EU:C:1998:370, paragraph 26; Case C‑324/00 Lankhorst-Hohorst  EU:C:2002:749, paragraph 37; Case C‑9/02 de Lasteyrie du Saillant  EU:C:2004:138, paragraph 50; and Marks & Spencer  EU:C:2005:763, paragraph 57).
40. However, it does not follow from any provision of European Union law that the origin of the shareholders, be they natural or legal persons, of companies resident in the European Union affects the right of those companies to rely on freedom of establishment. As the Advocate General has observed in point 60 of his Opinion, the status of being a European Union company is based, under Article 54 TFEU, on the location of the corporate seat and the legal order where the company is incorporated, not on the nationality of its shareholders.