European Union regulators who are investigating several countries’ tax policies suffered another setback in a challenge at the bloc's top court.
The European Court of Justice in Luxembourg ruled that regulators failed to back up claims that the UK corporation tax discriminated against some companies with cross-border operations.
The ruling follows a decision in November, when the court rejected a bid to recoup Spanish tax breaks that Banco Santander SA received for merger activity.
The EU is targeting tax deals throughout the 28-nation bloc that may have given domestic and overseas companies unfair advantages. The European Commission’s competition department is probing potentially unfair tax breaks for multinational companies.
In the latest case, the EU had sued the UK, saying that its rules limited possibilities to get cross-border relief and also restricted such relief only to losses suffered after 1 April 2006, when the law entered into force.
The EU court rejected the challenge by the European Commission “in its entirety”, ruling that the regulator failed to back up its claims that the UK’s corporation-tax rules “make it virtually impossible for a resident parent company to obtain cross-border group relief”.
The court also rejected that argument, saying that the EU regulator failed to establish “the existence of situations in which cross-border group relief for losses sustained before that date was not granted”.
The case is one in a series attempting to clarify an EU court ruling from 2005 involving the Marks & Spencer Group. An exception was created in that decision for cases where companies based in the UK can claim tax relief on losses by foreign subsidiaries.
The so-called 'Marks & Spencer exception' has since then “proved to be impracticable”, Advocate General Juliane Kokott of the EU court said in a non-binding opinion in the case last year.
News by Bloomberg, edited by ESM
