Luxembourg, 07/04/2005 (Agence Europe) - In the “Marks & Spencer” affair, Advocate General Poiares Maduro suggests the European Court of Justice should state that a group tax relief scheme (British) which does not allow the parent company to deduct the losses of its subsidiaries abroad is in principle incompatible with Community law. Such a scheme would be compatible, however, if the right to deduct such losses is subject to fulfilment of the condition that those losses cannot be accorded equivalent tax treatment in the Member States in which the foreign subsidiaries are established, a Court press release explains.
Marks & Spencer, which had suffered considerable losses in its German, Belgian and French subsidiaries in the nineties, had called for group relief on these losses. The tax authorities refused the claims on the grounds that the group relief scheme does not apply to subsidiaries which are neither resident nor economically active in the United Kingdom. Marks & Spencer had challenged that decision before the High Court, which asked the European Court of Justice what the situation was.
The Advocate General notes that the aim of the British scheme is to ensure the fiscal neutrality of the effects of the creation of a group of companies. If foreign subsidiaries are able to benefit both from the group relief scheme and at the same time from an analogous advantage in the State in which they were established, the consequent benefit might be a twofold taking into account of the losses in favour of the group, and thus a twofold advantage. “Where the State in which the foreign subsidiaries are established enables those subsidiaries to impute their losses to another person, the Member States are entitled to oppose a claim for the cross-border transfer of those losses. Relief would then have to be sought in the State in which the subsidiary was established. Consequently, the companies would not be at liberty to choose the place of imputation of their losses”, he concludes, before going on to add that this circumstance is likely to avert the risks of a “trafficking in losses” at Community level.