Law & Numbers - News Tax

EU Intercompany financing


EU - CIT - Intercompany financing

On July 7, 2007, ECJ extended the possibility for an EU country member to restrict the liberty of establishment with respect of taxes. In the case at hand, Finland tax regime allowed the tax deductibility of financial transfer from subsidiaries to its parent company if incorporated in Finland. ECJ agrees with this difference of tax treatment in order to maintain a fair allocation of taxes between EU state members and to prevent tax evasion.

EJC considers that the system of allocation of tax basis between EU state members would be jeopardized if group of companies could choose with no restriction the EU country member in which the profit of a subsidiary would be taxable. In addition, EJC enlarges the scope of the exception to prevent tax evasion beside the principle of fair allocation of the right to tax between EU member countries. Before this decision of the ECJ, tax fraud was received only for artificial scheme aimed at escaping EU country member tax rules and factual evidences were provided. According to this new decision, CJCE seems to agree that a theoretical risk is sufficient to justify a restriction to the liberty of establishment.

For further information, Please contact Marylène BONNY-GRANDIL:

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