CJEU - Recent Developments in Direct Taxation 2021

S. 621. Introduction

Under the Norwegian Tax Act (NTA), there is an interest limitation deduction rule in section 6-41. The core question in E-3/21 PRA Group Europe AS is whether the limitation on interest deductibility under section 6-41 is compatible with Article 31 of the Agreement on the European Economic Area (“EEA Agreement” or “EEA”), read in conjunction with Article 34.

2. Facts

PRA Group is a global group engaged in the acquisition of financial assets and service of debt. The group has several companies in Europe, which are owned by the holding company PRA Group Europe Holding S.à.r.l. That company is subject to taxation in Luxembourg.

PRA Group Europe Subholding AS (a tax resident limited liability company in Norway) was a wholly owned subsidiary of the holding company PRA Group Europe Holding S.à.r.l. PRA Group Europe Subholding AS was financed with a combination of equity and loan from the parent company. In its tax returns for 2014 and 2015, PRA Group Europe Subholding AS claimed a deduction for debt interest, according to the main rules for interest deduction under section 6-40 of the Norwegian Tax Act. However, the company asserted that Section 6-41 of the Tax Act entailed a ...