CJEU – Recent Developments in Direct Taxation 2018

1. S. 158Introduction

At the end of 2017, the Swedish Supreme Administrative Court (SAC) applied for preliminary rulings in two cases. Both cases derive from proceedings before the Swedish Board of Advance Tax Rulings (the Board). Both cases concern the Marks & Spencer exception regarding final losses and the determination of when a loss is considered to be final and should be taken into account in the resident state of the parent company.

As a starting point, the Marks & Spencer doctrine does not preclude provisions of a Member State that prevent a resident parent company from deducting from its taxable profits losses incurred by a subsidiary of another Member State, although they allow it to deduct losses incurred by a resident subsidiary.

However, according to the Marks & Spencer exception it is in conflict with the freedom of establishment to prevent the resident parent company form deducting the losses if they are final. In this contribution the Marks & Spencer exception is understood as an exception to the rule that the Member States may prevent resident parent companies from deducting losses from foreign subsidiaries. The exception applies when the parent company has demonstrated tha...