Cross-border group contributions - Draft legislation
Yesterday, 22 September, the Government issued draft legislation proposing specific rules for cross-border group deductions, which allow cross-border loss relief in certain circumstances. The legislation is in response to a number of court decisions from the Swedish supreme administrative court in March this year, where it was found that the Swedish group contribution rules were contrary to EU law, in particular by reference to the Marks & Spencer case. The draft legislation sets out some rather onerous requirements on the taxpayer and in our view a number of these requirements are still contrary to EU law.
Under the proposed rules, the deduction is only available where there are final losses in a directly held EEA subsidiary of a Swedish parent company and the subsidiary has been liquidated. Unlike the Swedish group contribution rules, it is not required that there is an actual transfer of funds (a group contribution). Instead, the rules are purely deduction-based.
There are further requirements in order to get the deduction, for example, the deduction is reduced by any transfers of untaxed values within a period of ten years before the liquidation. Furthermore, if the subsidiary has transferred a substantial part of its business to another group company (anywhere in the world) within a ten year period or if any business is still carried on in another group company within the same country after the liquidation, no deduction is available.
Difficulties can arise when determining the amount of the loss and the number of years taxpayers are expected to go back when re-calculating the overseas loss in accordance with Swedish rules.
The draft rules are expected to apply to losses in directly held subsidiaries where the liquidation has been finalised after 30 June 2010.
Kontakt:
Göran Ström, 08-723 96 05
Caroline Väljemark, 08-723 98 27
[2009-09-23]
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