(June 11, 2015)

On June 11, 2015 the opinion of Advocate General Kokott in Case C‑386/14 Groupe Steria SCA versus Ministère des finances et des comptes publics (ECLI:EU:C:2015:392) was published on the website of the European Court of Justice (CJEU).

Does Article 43 EC preclude the rules governing French group taxation which enable the parent company of a group to neutralise the add-back of the proportion of costs and expenses, fixed at 5% of the net amount only of those dividends received by it from resident companies included within the tax group, when such a right is refused to it under those rules as regards the dividends distributed to it from its subsidiaries established in another Member State which, had they been resident, would have been eligible in practice, if they so elected?

Main proceedings

·        The main proceedings concern the corporation tax of the French company Groupe Steria SCA (‘Groupe Steria’) from 2005 to 2008. Groupe Steria is the parent company of a group subject to the special rules governing group taxation.

·        Groupe Steria is seeking to deduct the 5% proportion for costs and expenses (‘5% proportion’), which is non-deductible under point 1 of Article 216 of the CGI, in respect of revenue that one of its French subsidiaries received from its holdings in companies established in other EU Member States. The French authorities refuse this deduction because it is only possible under paragraph 2 of Article 223 B of the CGI if the holdings’ revenue originates from a member of the tax group. Under paragraph 2 of Article 223 A of the CGI, however, companies resident abroad may not be members of a tax group.

·        Groupe Steria does in fact accept the exclusion of foreign companies from group taxation. However, it takes the view that the French legislation is inconsistent with the freedom of establishment in so far as it refuses to allow deduction of the 5% proportion in respect of holdings that could be part of the tax group were they not resident abroad.

Proceedings before the Court the questions referred for a preliminary ruling

·        The Cour administrative d’appel de Versailles (Administrative Court of Appeal, Versailles), which is now dealing with the main proceedings, referred the following question to the Court on 13 August 2014 for a preliminary ruling pursuant to Article 267 TFEU:

Does Article 43 EC preclude the rules governing French group taxation which enable the parent company of a group to neutralise the add-back of the proportion of costs and expenses, fixed at 5% of the net amount only of those dividends received by it from resident companies included within the tax group, when such a right is refused to it under those rules as regards the dividends distributed to it from its subsidiaries established in another Member State which, had they been resident, would have been eligible in practice, if they so elected?

·        In the proceedings before the Court, Groupe Steria, the Federal Republic of Germany, the French Republic, the Kingdom of the Netherlands, the United Kingdom of Great Britain and Northern Ireland, and the European Commission all submitted written observations. Groupe Steria, the French Republic and the Commission also made submissions at the hearing held on 13 May 2015.

In the opinion the Advocate proposes to the Court that the question referred by the Cour administrative d’appel de Versailles should be answered as follows:

The freedom of establishment under Article 43(1) EC and Article 48 EC precludes legislation of a Member State which under a special rule on group taxation available only to domestic companies allows group companies to deduct the charges relating to holdings in other group companies when this deduction is otherwise excluded.

For further information click here to be forwarded to the text of the opinion as published on the website of the CJEU, which will open in a new window.

Did you know that in our section CJEU Rulings we have made a selection of rulings of the CJEU? We have organized these rulings based on the subject they relate to (e.g. Freedom of establishment, Free movement of capital, Indirect taxes on the raising of capital, etc).

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