Group taxation - ECJ ruling enables inclusion of domestic subsidiary companies

The advantages of the Austrian Group taxation For corporations, this is mainly in the Result draw (Profits and losses within the group can generally be offset and are subject to taxation by the group holding company) and the fact that even Losses of foreign group members can be included. With regard to Members of foreign groups However, until now the Restriction onto the First level (Subsidiary). Therefore, the majority stakes held in domestic capital companies by the foreign subsidiary could not be included in the group.

The European Court of Justice has ruled in the case „Papillon“ (ECJ 27.11.2008, Rs C-418/07) Exclusion by domestic subsidiaries of foreign group members under French law as Violation of die Freedom of establishment Although the ECJ decision has already been classified in the literature in Austria as directly applicable, there has so far been no official response from the financial administration.

In a recently published information, the Financial Administration (BMF Info from 16.5.2012) the Applicability on the Austrian group taxation confirmed and the inclusion of the results of an domestic company that holds a subsidiary located in the Community area is permitted. Unlike the case of the foreign subsidiary, where only the losses in the shareholding ratio of the group sponsor can be capitalized, the Wins and losses the domestic Subsidiary company Ultimately to the Group support to be attributed. The result of the domestic subsidiary is in fact added to the group result 100% simultaneously with the result of the foreign group member.

The Expansion The Group taxation It is anyway to be welcomed, Although the existing boundaries must be taken into account, for example Not possible, the results of operations under the domestic subsidiary more domestic and foreign Companies with capital into Group taxation to include. This is disadvantageous in terms of losses, but far less so in profit-making situations, since the Gains regularly Oh well, the Participating income exemption are subject to. Whether the restriction to the first level constitutes a violation of the freedom of establishment remains to be seen. Following the group taxation system, it is also Not possible, a tax-effective partial amortization to the domestic subsidiary. A Depreciation of company value from the foreign subsidiary in the course of the acquisition of the domestic company, it is also not recognized for tax purposes in Austria.

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