Dorsey London Tax Update - Decision Of Swedish Supreme Court

Author:Mr Simon Whitehead
Profession:Dorsey & Whitney LLP

The Swedish Supreme Administrative Court, applying the ECJruling in Marks & Spencer, rules that the Swedish rules ongroup contributions are contrary to EU Law.Sweden operates a system under which a company may make a groupcontribution to another company. The group contribution is deductedfrom the taxable profits of the contributing company and isaccounted for as taxable income by the recipient company.Under Swedish law it is required that both the contributing andthe recipient company are liable to tax on business income inSweden.The Swedish Supreme Administrative Court, applying the ECJ'sdecision in Marks & Spencer, held that a Swedish parent wasentitled to deduct a cross border group contribution made to itsDutch subsidiary. The contribution was made during the tax year inwhich the Dutch subsidiary was finally liquidated.The Court distinguished between losses which became unusablethrough the trading position of the company and losses which becameunusable through the operation of foreign tax provisions. Thuswhile the contribution made to the Dutch subsidiary was allowed,the Court did not allow a contribution to an Italian subsidiarywhose losses could no longer be used by...

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