Dorsey London Tax Update - Decision Of Swedish Supreme Court

Author:Mr Simon Whitehead
Profession:Dorsey & Whitney LLP

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...

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