A Oy.
Date: 2013-02-21
24. In this respect, it must be recalled, first, that cross-border merger operations, like other company transformation operations, respond to the needs for cooperation and consolidation between companies established in different Member States. They are thus regarded as constituting particular methods of exercise of freedom of establishment, important for the proper functioning of the internal market, and are therefore among those economic activities in respect of which Member States are required to respect the freedom of establishment laid down by Article 49 TFEU (Case C-411/03 SEVIC Systems  [2005] ECR I-10805, paragraph 19).
27. The question of the application of those articles is different from the question whether a Member State may adopt measures in order to prevent attempts by certain of its nationals to evade national legislation by having recourse to the possibilities offered by the Treaty (see, to that effect, Case C-212/97 Centros  [1999] ECR I-1459, paragraph 18).
29. Since freedom of establishment applies to the case in the main proceedings, it must be recalled that, according to settled case-law, although direct taxation is a matter within the competence of the Member States, they must none the less exercise that competence in a manner consistent with European Union law (see, inter alia, Case C-446/03 Marks & Spencer  [2005] ECR I-10837, paragraph 29 and the case-law cited).
30. Freedom of establishment, which Article 49 TFEU grants to nationals of the European Union, includes, in accordance with Article 54 TFEU, for companies formed pursuant to 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 (see, inter alia, Case C-307/97 Saint-Gobain ZN  [1999] ECR I-6161, paragraph 35, and Case C-337/08 X Holding  [2010] ECR I-1215, paragraph 17).
33. For such a difference in treatment to be compatible with the provisions of the FEU Treaty on freedom of establishment, it must relate to situations which are not objectively comparable or be justified by an overriding reason in the public interest (see, by analogy with the free movement of capital, Case C-446/04 Test Claimants in the FII Group Litigation  [2006] ECR I-11753, paragraph 167). According to the Court’s case-law, the comparability of a cross-border situation with an internal one must be examined having regard to the aim pursued by the national provisions at issue (see, by analogy, Case C-231/05 Oy AA  [2007] ECR I-6373, paragraphs 36 to 38).
34. In tax law, the taxpayers’ residence is a factor that may justify differences of treatment between resident and non-resident taxpayers, but that is not always the case. To accept that the Member State of establishment may in all cases apply different treatment solely because the registered office of a company is situated in another Member State would deprive Article 49 TFEU of its content (see, inter alia, Marks & Spencer , paragraph 37).
39. For that purpose, it must be ascertained whether the difference in treatment is appropriate for ensuring attainment of the objective pursued and does not go beyond what is necessary to achieve that objective (see, to that effect, Marks & Spencer , paragraph 35).
Justification of the obstacle
41. As regards, first, the need to safeguard the allocation of the power to tax between the Member States, that may be capable of justifying a difference in treatment where the system in question is designed to prevent conduct liable to jeopardise the right of a Member State to exercise its powers of taxation in relation to activities carried on in its territory (see, to that effect, Case C-347/04 Rewe Zentralfinanz  [2007] ECR I-2647, paragraph 42, and Oy AA , paragraph 54).
42. Thus the preservation of the allocation of the power to impose taxes between Member States might make it necessary to apply to the economic activities of companies established in one of those States only the tax rules of that State in respect of both profits and losses ( Marks & Spencer , paragraph 45).
43. To give companies the right to elect to have 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 (see Oy AA , paragraph 55), in that the taxable bases would be altered in both States to the extent of the losses transferred.
44. As regards, next, the risk that losses would be used twice, such a risk does indeed exist if, in connection with a merger such as that at issue in the main proceedings, the parent company established in another Member State enjoys the possibility of deducting from its taxable income the losses of the merged subsidiary. That risk is averted by a rule which excludes that possibility (see, to that effect, Marks & Spencer , paragraphs 47 and 48).
45. As regards, finally, the risk of tax avoidance, the possibility of transferring the losses of a non-resident subsidiary to a resident company on the occasion of a merger entails the risk that that sort of restructuring will be organised within a group of companies so that the losses are taken into account in the Member States which apply the highest rates of tax and in which the tax value of the losses is therefore the highest (see, to that effect, Marks & Spencer , paragraph 49).
46. In the light of the above justifying factors taken together, it must be accepted that legislation of a Member State under which, in the context of a merger such as that at issue in the main proceedings, a parent company established in that Member State is denied the possibility of deducting from its taxable income the losses of the merged subsidiary established in another Member State, first, pursues legitimate objectives compatible with the Treaty and justified by overriding reasons in the public interest and, secondly, is appropriate to ensuring the attainment of those objectives (see, to that effect, inter alia, Marks & Spencer , paragraph 51).
47. It must none the less be examined whether such legislation goes beyond what is necessary to attain those objectives (see, to that effect, inter alia, Marks & Spencer , paragraph 53).
48. With respect to the proportionality of the obstacle to freedom of establishment, it must be observed, first, that granting the parent company the possibility of taking into account the losses of its non-resident subsidiary in connection with a cross-border merger is not a priori such as to allow the parent company to choose freely from one year to the next the tax scheme applicable to its subsidiaries’ losses (see, a contrario, X Holding , paragraph 31).
49. It follows, secondly, from the Court’s case-law that a restrictive measure such as that at issue in the main proceedings goes beyond what is necessary to attain the essential part of the objectives pursued in a situation in which the non-resident subsidiary has exhausted the possibilities available in its State of residence of having the losses taken into account (see, to that effect, Marks & Spencer , paragraph 55). It is for the parent company to show that that is the case (see, to that effect, Marks & Spencer , paragraph 56).
52. Nevertheless, those specific circumstances are not in themselves capable of showing that there is no possibility of taking into account the losses that exist in the subsidiary’s State of residence.
53. Thus several Member States which have intervened in the case consider, on the contrary, that the possibility of taking B’s losses into account in Sweden continues to exist. The German Government submits that those losses can be deducted from the income, admittedly very small, which B continues to receive in Sweden. It adds that B is still involved in leases which could be assigned. The French Government also submits that Swedish law allows companies to take losses into account in previous tax years or on the occasion of the taxation of capital gains made on the assets and liabilities of the merged company. The Italian Government submits that Sweden is entitled to evaluate the assets transferred and to tax the merged company on the profit thus realised.
54. It is therefore for the national court to determine whether A has in fact proved that B has exhausted all the possibilities of taking account of the losses which exist in Sweden.