Cross-Border Merger Case To ECJ

The Finnish Supreme Administrative Court decided on 7 March 2011 (KHO 2011:21) to request for a preliminary ruling from the Court of Justice of the European Union (ECJ) concerning the question whether a Finnish parent company may deduct the final tax losses of its Swedish subsidiary after a cross-border merger.

The Swedish subsidiary which had incurred substantial losses was wholly owned by the Finnish parent company. The tax losses in question could not be utilized in Sweden because the operations of the Swedish company were shut down and all the other Swedish group companies were unprofitable as well.

The tax burden of the Finnish parent company could be substantially reduced if the losses of its Swedish subsidiary could be reduced from the profits of the parent company. The Finnish Central Tax board had denied the right of the Finnish parent company to deduct the losses of its Swedish subsidiary due to the fact that the losses were calculated in accordance with