The Advocate General of the Court of Justice of the European Union (CJEU) has found that the Dutch tax rules are in breach of the freedom of establishment in that the rules deny tax consolidation (fiscal unity) between—
- A Dutch parent company and its Dutch sub-subsidiary if the subsidiary is not a resident of the Netherlands, or
- Two Dutch sister subsidiaries if the parent company is not resident in the Netherlands.
The Advocate General expressed the opinion that the Dutch law that denies tax consolidation when either a parent company or sister company is a foreign entity is in breach of EU law.
Under Dutch law, a fiscal unity for corporate income purposes cannot be established between sister companies of a foreign parent, or between sister companies and the foreign parent. This rule also applies to a domestic parent company that holds a domestic sub-subsidiary through an intermediate holding company resident abroad. The question presented to the Court of Justice of the European Union (CJEU) was whether this rule is in accordance with the EU freedom of establishment.
The Advocate General’s opinion is taken into account by the CJEU in arriving at its final decision on a case. The Court is not however bound by the opinion of the Advocate General and is entitled to reach a different conclusion in its final decision.
