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Document 62012CJ0080
Felixstowe Dock and Railway Company and Others
Felixstowe Dock and Railway Company and Others
Case C‑80/12
Felixstowe Dock and Railway Company Ltd and Others
v
The Commissioners for Her Majesty’s Revenue & Customs
(Request for a preliminary ruling from the First-tier Tribunal (Tax Chamber))
‛Reference for a preliminary ruling — Freedom of establishment — Corporation tax — Tax relief — Groups of companies and consortia — National legislation permitting losses to be transferred between a company belonging to a consortium and a company that is a member of a group which are connected by a ‘link company’ that is a member of both the group and the consortium — Residence condition for the ‘link company’ — Discrimination on the basis of where the corporate seat is located — Ultimate group parent company established in a third State and owning the companies which are seeking to transfer losses through companies established in third States’
Summary — Judgment of the Court (Grand Chamber), 1 April 2014
Freedom of movement for persons — Freedom of establishment — Tax legislation — Corporation tax — Tax relief — National legislation precluding the transfer of losses between a resident company that is a member of a group and another resident company belonging to a consortium where they are connected by a ‘link company’, a member of both the group and the consortium, which is established in another Member State — Not permissible — Justification — Balanced allocation of powers of taxation between the Member States — Combating abuse and tax avoidance — No justification
(Arts 49 TFEU and 54 TFEU)
Articles 49 TFEU and 54 TFEU must be interpreted as precluding legislation of a Member State under which it is possible for a resident company that is a member of a group to have transferred to it losses sustained by another resident company which belongs to a consortium where a ‘link company’ which is a member of both the group and the consortium is also resident in that Member State, irrespective of the residence of the companies which hold, themselves or by means of intermediate companies, the capital of the link company and of the other companies concerned by the transfer of losses, whereas that legislation rules out such a possibility where the link company is established in another Member State.
That difference in treatment makes it less attractive in tax terms to establish a link company in another Member State, since the national legislation grants the abovementioned tax advantage only in the case of a resident link company.
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.
As regards comparability, it is undisputed that companies liable to tax which are connected by a link company resident in a Member State and those which are connected by a link company established in another Member State are, in the light of the aim of the tax regime concerned, placed in objectively comparable situations, so far as concerns the possibility of transferring to each other, by means of consortium group relief, losses sustained in the first Member State.
Nor can the restriction on freedom of establishment be justified by overriding reasons in the public interest relating to the objective of preserving a balanced allocation of powers of taxation between the Member States, of combating purely artificial arrangements, aimed at circumventing the legislation of the Member State concerned, or of combating tax havens.
Furthermore, 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. 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.
(see paras 21, 25, 26, 31, 32, 35, 40, 42, operative part)
Case C‑80/12
Felixstowe Dock and Railway Company Ltd and Others
v
The Commissioners for Her Majesty’s Revenue & Customs
(Request for a preliminary ruling from the First-tier Tribunal (Tax Chamber))
‛Reference for a preliminary ruling — Freedom of establishment — Corporation tax — Tax relief — Groups of companies and consortia — National legislation permitting losses to be transferred between a company belonging to a consortium and a company that is a member of a group which are connected by a ‘link company’ that is a member of both the group and the consortium — Residence condition for the ‘link company’ — Discrimination on the basis of where the corporate seat is located — Ultimate group parent company established in a third State and owning the companies which are seeking to transfer losses through companies established in third States’
Summary — Judgment of the Court (Grand Chamber), 1 April 2014
Freedom of movement for persons — Freedom of establishment — Tax legislation — Corporation tax — Tax relief — National legislation precluding the transfer of losses between a resident company that is a member of a group and another resident company belonging to a consortium where they are connected by a ‘link company’, a member of both the group and the consortium, which is established in another Member State — Not permissible — Justification — Balanced allocation of powers of taxation between the Member States — Combating abuse and tax avoidance — No justification
(Arts 49 TFEU and 54 TFEU)
Articles 49 TFEU and 54 TFEU must be interpreted as precluding legislation of a Member State under which it is possible for a resident company that is a member of a group to have transferred to it losses sustained by another resident company which belongs to a consortium where a ‘link company’ which is a member of both the group and the consortium is also resident in that Member State, irrespective of the residence of the companies which hold, themselves or by means of intermediate companies, the capital of the link company and of the other companies concerned by the transfer of losses, whereas that legislation rules out such a possibility where the link company is established in another Member State.
That difference in treatment makes it less attractive in tax terms to establish a link company in another Member State, since the national legislation grants the abovementioned tax advantage only in the case of a resident link company.
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.
As regards comparability, it is undisputed that companies liable to tax which are connected by a link company resident in a Member State and those which are connected by a link company established in another Member State are, in the light of the aim of the tax regime concerned, placed in objectively comparable situations, so far as concerns the possibility of transferring to each other, by means of consortium group relief, losses sustained in the first Member State.
Nor can the restriction on freedom of establishment be justified by overriding reasons in the public interest relating to the objective of preserving a balanced allocation of powers of taxation between the Member States, of combating purely artificial arrangements, aimed at circumventing the legislation of the Member State concerned, or of combating tax havens.
Furthermore, 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. 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.
(see paras 21, 25, 26, 31, 32, 35, 40, 42, operative part)