Keywords
Summary

Keywords

Freedom of movement for persons — Freedom of establishment — Tax legislation — Corporation tax — National legislation providing for reincorporation of losses deducted previously in the event that an establishment is transferred to a non-resident company in the same group — Not permissible — Justification — Balanced allocation of the power to impose taxes between Member States — No such justification

(Arts 49 TFEU and 54 TFEU; Agreement on the European Economic Area, Arts 31 and 34)

Summary

Articles 49 TFEU and 54 TFEU and Articles 31 and 34 of the Agreement on the European Economic Area (EEA) preclude legislation of a Member State under which, in the event of transfer by a resident company to a non-resident company in the same group of a permanent establishment situated in another Member State or in another State that is party to the EEA Agreement, the losses previously deducted in respect of the establishment transferred are reincorporated into the transferring company’s taxable profit, in so far as the first Member State taxes both the profits made by that establishment before its transfer and those resulting from the gain made upon the transfer.

Such legislation goes beyond what is necessary to attain the objective relating to the need to safeguard the balanced allocation of the power to impose taxes, which is intended to safeguard the symmetry between the right to tax profits and the right to deduct losses.

This conclusion is not altered by the fact that it may be difficult in the event of an intragroup transfer to verify the market value of the business transferred in another Member State.

Moreover, the national tax authorities in any event always have the power to request from the transferring company the documents that appear to them necessary in order to verify whether the value of the business adopted for the purpose of calculating the gain on transfer of a foreign establishment is the same as the market value.

(see paras 32, 36, 37, 39, 40, operative part)