European Court of Justice Advocate General Juliane Kokott in an October 23 opinion advised the ECJ to abandon the Marks & Spencer exception for loss relief for foreign group members and sanction UK legislation that restricts such loss relief.
Kokott said the Marks & Spencer ruling (Case C-446/03) has given rise to a “virtually inexhaustible source of legal disputes” and thus does not satisfy the requirements of legal certainty.
In Kokott’s view, even if an EU law gives no loss relief for a non-resident subsidiary, the law would satisfy the principle of proportionality. Moreover, “any restriction on cross-border relief in respect of a subsidiary is thus justified by ensuring the cohesion of a tax system or the allocation of the power to impose taxes between Member States,” the Advocate General said.
Using these standards, United Kingdom restrictions on group relief are not contrary to the freedom of establishment, Kokott concluded.
See, European Commission v United Kingdom of Great Britain and Northern Ireland (Case‑172/13).
