Group Members: Lim Zhen Ting (619352) Cheryl Yap (619747) SCA Group Holding C-39/13 Group Members: Lim Zhen Ting (619352) Cheryl Yap (619747)

Background Under Dutch tax law, companies can file one single tax return (corporate tax computed on a consolidated basis) Subject to the following conditions: 1. Eligible companies should all be corporate tax resident in Netherlands, or should at least have a sufficient nexus within the Netherlands territory by virtue of a branch situated there or is a PE in Netherlands 2. Head of the fiscal unity should own at least 95% of the shares in other group companies Holding Co. Taxable Income: $75,000 Sub Co. A $90,000 Sub Co. B ($15,000)

The Situation (2 joint issues) 1) 2) Parent Company in another EU member state Dutch Parent Subsidiary in another EU member state Dutch Sub. Dutch Sub. Dutch Sub-Subsidiary SCA requested to form a fiscal unity from the tax authorities but was rejected Brought up the case to court and referenced the Papillon case Argued that the rejection was incompatible with Freedom of Establishment

Court’s Decision: Agreed with SCA Denial of approval constitutes a restriction of freedom of establishment In a purely domestic context, having an intermediate company would not nullify the formation of a fiscal unity Reason: Without a fiscal unity, having an intermediate / parent company in another EU state would place the overall group in a less advantageous position Rejected justifications: 1) Avoiding double loss deduction at parent company’s level 2) The need to limit tax evasion or avoidance

Denial of Fiscal unity

Implications Involved WITHIN EU: OUTSIDE EU: Favourable for Dutch companies to form a part of international groups in another EU member states as a fiscal unity would be granted Other EU members with group consolidation policies may need to follow suit Possibility for non-EU intermediate company to form a group based on the anti-discrimination rules set by the OECD Model Convention Might open up to tax avoidance as MNCs can decide where to pay taxes i.e. loss-shopping Losses would be deducted in countries with a higher tax rate