Opinion of Advocate General Kokott delivered on 10 January 2019.

JurisdictionEuropean Union
CourtCourt of Justice (European Union)
ECLIECLI:EU:C:2019:8
Date10 January 2019
Procedure TypeReference for a preliminary ruling
Docket NumberC-607/17
Celex Number62017CC0607

Provisional text

OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 10 January 2019 (1)

Case C607/17

Skatteverket

v

Memira Holding AB

(Request for a preliminary ruling from the Högsta förvaltningsdomstol (Supreme Administrative Court, Sweden))

(Request for a preliminary ruling — National tax legislation — Freedom of establishment — Deduction of losses of a foreign subsidiary in the State of the parent company in the context of a merger — Justification of non-deductibility of ‘final losses’ — Proportionality of an absence of cross-border relief for losses — Notion of ‘final losses’)






I. Introduction

1. The point at issue in this case (2) is whether a Swedish parent company has the right, on the basis of Article 49 TFEU in conjunction with Article 54 TFEU, to deduct the losses in a wholly-owned subsidiary established in Germany from its profits if that subsidiary is wound up by way of a merger with the parent company and it was not able fully to ‘use’ its losses made in Germany there.

2. The fundamental freedoms do not in principle require cross-border use of losses within a group. Losses arising abroad would thus be forfeited. Only in the case of final losses is it possible that cross-border use of losses is necessary, for reasons of proportionality, in accordance with the judgment delivered by the Grand Chamber of the Court of Justice (3) in Marks & Spencer in 2005.

3. A number of problems have grown up around these ‘final losses’, which have already led to several decisions by the Court. (4) However, the decisions thus far have not been able to clarify definitively the conditions for final losses, as is evident from this new reference. In this regard, the Court will presumably repeatedly be given an opportunity — if it still wishes to adhere to the final losses exception (5) — to refine this category.

II. Legal framework

A. EU law

4. The framework for the case in EU law is provided by freedom of establishment of companies or firms under Article 49 TFEU in conjunction with Article 54 TFEU and Directive 2009/133/EC (6) (‘the Mergers Directive’).

5. The Mergers Directive makes provision with regard to losses in the transferring company only in its Article 6:

‘To the extent that, if the operations referred to in Article 1(a) were effected between companies from the Member State of the transferring company, the Member State would apply provisions allowing the receiving company to take over the losses of the transferring company which had not yet been exhausted for tax purposes, it shall extend those provisions to cover the takeover of such losses by the receiving company’s permanent establishments situated within its territory.’

B. Swedish law

6. The Mergers Directive was transposed into Swedish law in Chapter 37 of the Inkomstskattelag (1999:1229). (7)

7. A merger is defined in Paragraph 3 as a conversion. It must satisfy two conditions at the same time. Firstly, all assets and liabilities and other obligations of one company (the transferring company) must be taken over by another company (the receiving company). Secondly, the transferring company must be dissolved without liquidation. In order for the special tax rules on mergers in Paragraphs 16 to 29 to apply, it is further required that the merger be what is known as a qualifying merger.

8. In order for a merger to be a qualifying merger, it is necessary, under Paragraph 11, for the transferring company to be liable, immediately before the merger, to pay tax in Sweden on revenue from at least part of its economic activities. Furthermore, under Paragraph 12, the receiving company must be liable, immediately after the merger, to pay tax in Sweden on revenue from the economic activities in respect of which the transferring company was taxed. The revenue may not be exempt, fully or in part, from taxation in Sweden under a double taxation agreement.

9. The result of a qualifying merger is, under the first subparagraph of Paragraph 17, that the transferring company is not to enter any revenue or deduct any expenditure, by reason of the merger, in respect of the economic activity referred to in Paragraph 11. Instead, as regards that economic activity, under the first subparagraph of Paragraph 18, the receiving company is to adopt the transferring company’s tax situation. That means, inter alia, that the receiving company may deduct deficits in the transferring company from earlier tax years, within certain limits set out in Paragraphs 21 to 26.

10. In Swedish law, group relief is normally used to achieve, by the transfer of profits, internal profit and loss compensation within a cross-border group of companies. Group relief is regulated in Chapter 35a of the Inkomstskattelag (1999:1229). Under Paragraphs 2 and 5, a Swedish parent company may apply group relief to a definitive loss made by a wholly-owned, foreign subsidiary in a State within the EEA provided, inter alia, that the subsidiary has been placed into liquidation and that liquidation has been completed. Those provisions do not apply to mergers, however, according to the referring court.

III. Main proceedings

11. The case concerns a preliminary decision by the Skatterättsnämnden (Revenue Law Commission, Sweden). The preliminary decision is based on the following facts:

12. Memira Holding AB (Memira) is the parent company of a group with subsidiaries in a number of countries, including Germany. The activity in the German subsidiary has led to losses. The economic activity of that subsidiary has now been wound down. In the subsidiary there remain only debts and certain liquid assets. The group is now considering allowing the subsidiary to merge with the Swedish parent company in a cross-border merger. The merger means the subsidiary being dissolved without liquidation. After the merger, the group will have no company remaining in Germany. The group will not operate there either, whether through the parent company or through any other company in the group.

13. The German subsidiary has accumulated losses from previous years of around EUR 7.6 million in total. The losses relate to activity in Germany and arise from its lack of profitability. The losses may be deducted from tax by the subsidiary in Germany and unused losses may be carried over and deducted from any profits the subsidiary makes in future years, without limit of time. However, under German law it is not possible through a merger to carry over losses to another company which is liable for tax in Germany.

14. The Revenue Law Commission found that the company, on merging with the German subsidiary, does not satisfy the conditions for deduction in respect of the deficit on the basis of EU law. According to the Court of Justice, when assessing whether losses are definitive, it is necessary to take into account how the loss is treated under the legislation of the State where the subsidiary is established. Since, under German law, there is no possibility of using the losses on a merger with another company which is liable for tax in Germany, the losses may notbe regarded as definitive within the meaning of the Court’s case-law. There is thus no infringement of EU law.

15. Both the Skatteverket (Swedish Tax Board) and the applicant Memira have appealed against the preliminary decision before the Högsta förvaltningsdomstol (Supreme Administrative Court, Sweden).

IV. Request for a preliminary ruling and procedure before the Court

16. The Högsta förvaltningsdomstol (Supreme Administrative Court), which is hearing the dispute, has referred the following questions to the Court:

1. Must account be taken, in the assessment of whether a loss in a subsidiary in another Member State is definitive within the meaning given in, inter alia, the case of A, and the parent company may thus deduct the loss on the basis of Article 49 TFEU, of the fact that, under the rules of the subsidiary’s State, there are restrictions on the possibility for parties other than the party itself which made the loss to deduct the loss?

2. If a restriction such as that referred to in question 1 must be taken into consideration, must account then be taken of whether, in the case in question, there actually is another party in the subsidiary’s State which could have deducted the losses if that were permitted there?

17. In the proceedings before the Court, Memira, the Kingdom of Sweden, the Federal Republic of Germany, the United Kingdom, the Republic of Finland, the Italian Republic and the European Commission submitted written observations on these questions. The Swedish Tax Board, the Kingdom of Sweden, the Federal Republic of Germany, the Republic of Finland and the European Commission took part in the hearing on 24 October 2018.

V. Legal assessment

A. The questions referred

18. Both questions referred relate to final losses in a subsidiary which ceases to exist as a result of a merger.

19. By its first question, the referring court expressly wishes to know if account must be taken, in determining whether the ‘loss in a subsidiary in another Member State is definitive within the meaning given in, inter alia, the case of A’, of the fact that there are restrictions on third parties using the loss in the State where the subsidiary is established.

20. The specific point at issue is whether freedom of establishment (Article 49 TFEU in conjunction with Article 54 TFEU) obliges Sweden to take into account losses in a subsidiary established in Germany which have been incurred over the years (or, more precisely, are carried over) if the subsidiary is merged with the parent company and thereby placed in liquidation. The losses could not be used in the context of a merger under German tax law and would therefore be forfeited as a result of the liquidation in Germany.

21. If the first question is to be answered in the affirmative, the referring court wishes to know whether the situation is any different if, in the...

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5 practice notes
  • Conclusiones de la Abogado General Sra. J. Kokott, presentadas el 13 de junio de 2019.
    • European Union
    • Court of Justice (European Union)
    • 13 June 2019
    ...(C‑385/12, EU:C:2013:531), punto 40; en el asunto ANGED (C‑233/16, EU:C:2017:852), punto 38, y en el asunto Memira Holding (C‑607/17, EU:C:2019:8), punto 35 Véanse mis conclusiones presentadas en el asunto Hervis Sport- és Divatkereskedelmi (C‑385/12, EU:C:2013:531), punto 41. 36 Sentencia ......
  • Opinion of Advocate General Collins delivered on 10 March 2022.
    • European Union
    • Court of Justice (European Union)
    • 10 March 2022
    ...EU:C:2018:424). 45 Sentenza del 23 ottobre 2008 (C‑157/07, EU:C:2008:588, punto 49). 46 Sentenze del 19 giugno 2019, Memira Holding (C‑607/17, EU:C:2019:510), e del 19 giugno 2019, Holmen (C‑608/17, 47 Sentenza del 13 dicembre 2005 (C‑446/03, EU:C:2005:763). 48 Sentenza del 15 maggio 2008, ......
  • Google Ireland
    • European Union
    • Court of Justice (European Union)
    • 12 September 2019
    ...(C‑385/12, EU:C:2013:531, paragrafo 40), nella causa ANGED (C‑233/16, EU:C:2017:852, paragrafo 38) e nella causa Memira Holding (C‑607/17, EU:C:2019:8, paragrafo 28 V. le mie conclusioni nella causa Hervis Sport- és Divatkereskedelmi (C‑385/12, EU:C:2013:531, paragrafo 41). 29 V. sentenze d......
  • Opinion of Advocate General Kokott delivered on 17 October 2019.
    • European Union
    • Court of Justice (European Union)
    • 17 October 2019
    ...mie conclusioni nella causa Nordea Bank (C‑48/13, EU:C:2014:153, paragrafi da 21 a 28) e, sulla base di quest’ultima, Memira (C‑607/17, EU:C:2019:8, paragrafo 46), nonché Holmen (C‑608/17, EU:C:2019:9, paragrafo 38) avevo proposto alla Corte di concludere in tal 15 V. al riguardo, più nel d......
  • Request a trial to view additional results
5 cases
  • Conclusiones de la Abogado General Sra. J. Kokott, presentadas el 13 de junio de 2019.
    • European Union
    • Court of Justice (European Union)
    • 13 June 2019
    ...(C‑385/12, EU:C:2013:531), punto 40; en el asunto ANGED (C‑233/16, EU:C:2017:852), punto 38, y en el asunto Memira Holding (C‑607/17, EU:C:2019:8), punto 35 Véanse mis conclusiones presentadas en el asunto Hervis Sport- és Divatkereskedelmi (C‑385/12, EU:C:2013:531), punto 41. 36 Sentencia ......
  • Google Ireland
    • European Union
    • Court of Justice (European Union)
    • 12 September 2019
    ...(C‑385/12, EU:C:2013:531, paragrafo 40), nella causa ANGED (C‑233/16, EU:C:2017:852, paragrafo 38) e nella causa Memira Holding (C‑607/17, EU:C:2019:8, paragrafo 28 V. le mie conclusioni nella causa Hervis Sport- és Divatkereskedelmi (C‑385/12, EU:C:2013:531, paragrafo 41). 29 V. sentenze d......
  • Opinion of Advocate General Kokott delivered on 17 October 2019.
    • European Union
    • Court of Justice (European Union)
    • 17 October 2019
    ...mie conclusioni nella causa Nordea Bank (C‑48/13, EU:C:2014:153, paragrafi da 21 a 28) e, sulla base di quest’ultima, Memira (C‑607/17, EU:C:2019:8, paragrafo 46), nonché Holmen (C‑608/17, EU:C:2019:9, paragrafo 38) avevo proposto alla Corte di concludere in tal 15 V. al riguardo, più nel d......
  • Tesco-Global Áruházak
    • European Union
    • Court of Justice (European Union)
    • 4 July 2019
    ...(C‑385/12, EU:C:2013:531, point 40), dans l’affaire ANGED (C‑233/16, EU:C:2017:852, point 38) et dans l’affaire Memira Holding (C‑607/17, EU:C:2019:8, point 27 Voir les conclusions que j’ai présentées dans l’affaire Hervis Sport- és Divatkereskedelmi (C‑385/12, EU:C:2013:531, point 41). 28 ......
  • Request a trial to view additional results

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