EU court to hear Swedish case on application of Marks & Spencer to losses in subsidiary not directly owned by parent

The Court of Justice of the European Union on January 8 published a reference from a Swedish court asking whether a parent company’s right to deduct definitive losses of a subsidiary based on the Marks & Spencer case is dependent on the subsidiary being directly owned by the parent company.

In the case, Skatteverket v Holmen AB (Case C-608/17), the Swedish court also asks several questions concerning when a loss is considered to be definitive. The referring court asks what would happen if, under the tax rules of the subsidiary’s State, profits that could not be set off in a particular year could be carried over and potentially be deducted in a future year.

The Swedish court also asks what would happen if, under the rules in the subsidiary’s State, there is a restricted ability for parties other than the party making the loss to deduct the loss.

Further, the Swedish court asks whether, assuming account is to be taken of such a restriction, whether it matters that the restriction has in fact led to it not being possible to set off any part of the losses against profits made by another party.

A second reference from the same Swedish court, (Case C-607/17) Skatteverket v Holmen AB, released the same day, asks the EU court to resolve more questions concerning deduction of definitive losses of a subsidiary. The court asks:

“Must account be taken, in the assessment of whether a loss in a subsidiary in another Member State is definitive within the meaning given in, inter alia, the case of A, and the parent company may thus deduct the loss on the basis of Article 49 TFEU, of the fact that, under the rules of the subsidiary’s State, there are restrictions on the possibility for parties other than the party itself which made the loss to deduct the loss?”

If a restriction such as that referred to in question 1 must be taken into consideration, must account then be taken of whether, in the case in question, there actually is another party in the subsidiary’s State which could have deducted the losses if that were permitted there?”