CJEU – Recent Developments in Direct Taxation 2017

1. S. 36The Masco Denmark Case (C-593/14)

The case C-593/14, Masco Denmark ApS and Damixa ApS v Ministry of Taxation was presented both at the 2015 and the 2016 conferences.

Advocate General Kokott issued her opinion on 12 May 2016. She did not consider that the refusal to allow a Danish parent company a tax exemption because of the German rules on thin capitalization constituted a restriction in relation to Article 48 EC (now Article 54 of the TFEU). The Advocate General went on to state that if the Court were to establish that the measure did constitute a restriction, it could nevertheless be justified by reference to the principle of the balanced allocation of the power to impose taxes between Member States and the need to preserve the coherence of the national tax system.

In its judgment of 21 December 2016, the CJEU decided not to follow the opinion of the Advocate General.

The Court concluded that the tax exemption in question did constitute a tax advantage, and the fact that a resident parent company was not granted this advantage by reason of the rules on thin capitalization of the Member State in which the subsidiary was resident, was liable to render less attractive the exercise o...