JHA | ECJ confirms the Marks and Spencer no possibilities test

A Oy: ECJ confirms the Marks and Spencer no possibilities test and applies the case law in the context of a merger

February 25, 2016


Originally printed in Highlights & Insights on European Taxation, 2013 Issue 5.

By Paul Farmer and Nicola Hine


A Oy (C-123/11) concerns Finnish tax law and the possibility of using losses sustained in another Member State after a merger which made the losses unusable. Advocate General Kokott’s view was significantly different to that of the CJ in this matter, the CJ confirming and applying its earlier judgment in Marks & Spencer (C-446/03). It restated that tax legislation restricting the freedom of establishment cannot be justified where there was no past or future possibility of using the losses incurred by a subsidiary in its State of residence either by the subsidiary itself or by a third party. The CJ puts the onus squarely on the national courts to undertake a review of the specific facts involved in the case to conclude if the no possibilities exception is satisfied.

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