A Oy

(Tax law – Freedom of establishment – Directive 2009/133/EEC – National income tax law – Merger of two companies resident in different Member States – Deductibility of losses of the transferring company in the Member State of the receiving company)

The name Marks & Spencer is actually that of a chain of department stores. In the Court’s case-law on tax law, however, it stands for an express recognition that the allocation of taxation powers among the Member States may justify restrictions of the freedom of establishment. ( 2 ) In the Member States’ case-law and in the works of commentators, on the other hand, the name Marks & Spencer appears also to be synonymous with chaos and despair. ( 3 )

This is due to a single sentence of approximately 100 words which was formulated by the Court in the judgment named after Marks & Spencer and which describes the circumstances in which the Member States may be obliged, exceptionally, to take into account losses of non‑resident subsidiary companies when taxing their resident parent companies. In spite of so many words, it is not clear how far that exception extends and whether – in view of the Court’s subsequent case-law – it still exists at all.

The present reference for a preliminary ruling could provide an opportunity to put an end to the confusion which has arisen because of that exception. The taxable Finnish company in the main proceedings seeks to rely on the exception formulated by the Court. It wishes to merge with a Swedish subsidiary and to use the latter’s accumulated Swedish losses in future in Finland, which however is not allowed by the Finnish tax rules.

‘Within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited. Such prohibition shall also apply to restrictions on the setting-up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of any Member State.