The Swedish Supreme Administrative Court, applying the ECJ
ruling in Marks & Spencer, rules that the Swedish rules on
group contributions are contrary to EU Law.
Sweden operates a system under which a company may make a group
contribution to another company. The group contribution is deducted
from the taxable profits of the contributing company and is
accounted for as taxable income by the recipient company.
Under Swedish law it is required that both the contributing and
the recipient company are liable to tax on business income in
The Swedish Supreme Administrative Court, applying the ECJ's
decision in Marks & Spencer, held that a Swedish parent was
entitled to deduct a cross border group contribution made to its
Dutch subsidiary. The contribution was made during the tax year in
which the Dutch subsidiary was finally liquidated.
The Court distinguished between losses which became unusable
through the trading position of the company and losses which became
unusable through the operation of foreign tax provisions. Thus
while the contribution made to the Dutch subsidiary was allowed,
the Court did not allow a contribution to an Italian subsidiary
whose losses could no longer be used by operation of Italian
The Court also held that a contribution could only be made in
respect of categories of losses recognised by Swedish law.
The Swedish Court's ruling is interesting because the
Swedish group contribution rules had previously been thought to be
compatible with EC law in the light of...