The European Court of Justice must currently review an Italian regulation that prevents certain companies from benefiting from a more favorable rule regarding the deductibility of interest expenses in the case of a cross-border group taxation scheme solely because their common parent company is resident in another Member State. Advocate General Juliane Kokott presented her Opinion on the matter and suggests the court decide that such national legislation is not hindered by the freedom of establishment under Articles 49 and 54 TFEU.
In a most recent judgment, the European Court of Justice decided that Article 10a of the Dutch Corporate Income Tax Act providing for an interest deduction limitation rule in wholly artificial arrangements is compatible with EU law. Although this article introduces a difference in treatment between a domestic and a cross-border situation, such a difference is justified based on the need to combat tax fraud and tax evasion.
In a recent judgement the European Court of Justice (ECJ) has clarified that it is contrary to the freedom of establishment to deny the deduction of interest costs on a loan from a normally taxed group company, if this would not have happened had the loan been granted from a normally taxed Swedish group company instead.
