ECJ - Recent Developments in Direct Taxation 2012

S. 31The Finnish Case: C-6/12 P – Does the Finnish Authorization System concerning Deduction of Losses Constitute State Aid?

S. 331. Facts of the Case and the Relevant Domestic Law

According to the main rule in Section 117 of the Income Tax Act (”the TVL”) losses of a company may be deducted from the future profits of the company in accordance with the provisions of the TVL. The losses are deducted in the order in which they accrued. According to TVL Section 119(1), losses may be deducted from profits in the ten years following the loss year.

TVL Section 122, however, includes a special provision concerning the treatment of losses in ownership change situations. The purpose of the provision is to reduce the attractiveness of selling and buying loss companies. According to TVL Section 122(1), the deductibility of losses is lost if during or after the loss year the ownership of more than 50% of the shares in the company has been changed (for a reason other than inheritance). According to TVL Section 122(3), the tax administration, however, may allow the loss deduction if there are special reasons and allowing the loss deduction is necessary from the perspective of the continuation of the business...