Luxembourg, 19/07/2007 (Agence Europe) - On Wednesday 18 July, the Court ruled that Finland may tax a financial transfer carried out by a Finnish company to its parent company abroad. This confirms the caselaw established by the Marks & Spencer case (C-446/03) and others. It must be noted, however, that freedom of establishment is in fact restricted by such a taxation regime. If a profitable subsidiary wishes to come to the financial assistance of a subsidiary in financial difficulty, the losses incurred by the latter may be deducted from the total taxable amount if the two subsidiaries are located in Finland. On the other hand, if the subsidiary in deficit is located abroad, it is the total amount of “gross” profits that is subject to taxation before being exported. It is this taxation that the Finnish company, OyAA, challenged before the Korkein hallinto-oikeus (Finland's Supreme Administrative Court). The Court, however, ruled that this restrictive aspect of the Finnish legislation is compatible with Community law. In its absence, the international corporate groups would be tempted to set in place artificial arrangements with a view to sharing out all their revenue between various member states in order to benefit from the most advantageous tax rate. This decision is in line with the overall tax coordination initiative launched by the Commission in December 2006 (EUROPE 9331). (cd)