Opinion of the A-G, in Oy AA: Finnish group relief system compatible with EC Law
Within the Finnish group relief system, it’s possible, under certain conditions, to make financial transfers within a group that are tax deductible for the distributor and taxable income for the recipient. This way, losses can be offset against profits within the same group of corporations. Transfers are possible in all directions, from parent company to (sub-)subsidiary and vice versa, as well as between sister companies.
However, one of the conditions for this advantageous regime to apply gave rise to a dispute which will be judged by the ECJ. For the transfer to be tax deductible by the distributor, the recipient has to be a Finnish company.
This dispute is very similar to the one judged in the Marks & Spencer Case of the 13th of December 2005 (Case C-446/03). In general, Advocate-General Kokott seems to follow the decision of the ECJ in that case. Restricting the group relief system to domestic companies constitutes a restriction to the right of establishment. However, such a restriction can be justified by the need for preservation of allocation of taxing powers between the different Member States.
The Oy AA case differs from the M&S case to the extent that in Marks and Spencer, the losses of foreign subsidiaries of M&S could not be offset with UK profits because of the liquidation of these subsidiaries. Thus, the ECJ considered the British group relief system disproportionate, as far as the impossibility to repatriate foreign losses is concerned.
In this case, however, Advocate-General Kokott clearly states that such facts are not present in the Oy AA case and that the ECJ needn’t decide about such exceptional situations.
