Tax Consolidation Regime: Recent Court Decision With Subsequent Referral To The Court Of Justice Of The EU

Author:Mr Hugues Henaff and Marie Bentley
Profession:ATOZ Tax Advisers
 
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In Luxembourg, tax consolidation allows the consolidation of the respective tax results of each integrated company so as to be taxed globally, as if they were a single taxpayer. Since 2015, the Luxembourg tax consolidation regime makes the distinction between the vertical consolidation where the results are consolidated at the level of an integrating parent company and the horizontal tax consolidation where the tax results are consolidated at the level of an integrating subsidiary company. The horizontal tax consolidation was introduced following a ruling of the CJEU released in 2014 in respect of the Dutch tax consolidation regime. Based on this ruling, few Luxembourg companies requested the application of the horizontal tax consolidation regime retroactively as from 2013.The benefit of such regime was however denied by the tax authorities and the taxpayers lodged appeals against the tax authorities' position. In the context of the litigation, legal technical issues have arisen about the EU compliance of the "old" tax consolidation regime, the requirement to end an existing vertical tax consolidation (with a potential retroactive effect if the 5 year period is not met) in order to benefit from the horizontal tax consolidation and the timing for requesting the application of the horizontal tax consolidation. All of them have been referred to the CJEU in order to be clarified and could have an impact on the current Luxembourg tax consolidation regime. On 29 November 2018, the Luxembourg Administrative Court (the "Court") referred several questions to the Court of Justice of the EU ("CJEU") in respect of the Luxembourg tax consolidation regime.1 This case is interesting and worth delving further into it as it could result in an extension, or a confirmation, of the scope of the tax consolidation in Luxembourg in the near future.

Aim of the Luxembourg tax consolidation regime

In Luxembourg, tax consolidation is allowed for corporate income tax ("CIT") and municipal business tax ("MBT") purposes. The purpose of the tax consolidation is to allow Luxembourg companies of the same group (or of some of them only) to opt, under specific conditions, for a sort of consolidated taxation, without jeopardizing the patrimonial autonomy of the relevant companies under company law.

Tax consolidation allows the consolidation of the respective tax results of each integrated company prepared on a standalone basis so as to be taxed...

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