Global

Details

  • Service: Tax, International Corporate Tax, Mergers & Acquisitions, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 2/22/2013

Finland - Deductibility of cross-border losses on mergers  

February 22:   The Court of Justice of the European Union (CJEU) held that under the EU “freedom of establishment” provision, a national law cannot prevent a company that is a resident in one EU Member State from deducting losses suffered by a subsidiary in another EU Member State, following a merger, if the subsidiary had exhausted all possibilities within its country to use its accumulated tax losses. A Oy, C-123/11 (21 February 2013)

Read the judgment: C-123/11

Summary

A Finnish resident company wholly owned (100%) a Swedish company. The Swedish company had suffered losses over a six-year period.


The Finnish company merged with its Swedish subsidiary, and in turn, the Swedish subsidiary was dissolved and all its assets were acquired by the Finnish company.


Under Finland’s tax rules, the losses of a merged company having its registered office in another country are not deductible (whereas losses of a merged Finnish company are deductible).


The CJEU concluded that the different treatment afforded cross-border mergers went beyond what was necessary to attain the objectives of the Finnish law when the non-resident subsidiary had exhausted all possibilities to use its tax losses in its own EU Member State. Thus, the judgment confirmed the Marks & Spencer exception.


Read a February 2013 report [PDF 191 KB] prepared by KPMG’s EU Tax Centre: CJEU decision in A Oy case – deductibility of cross-border losses




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