• Advocate General Opines On Compliance with EU Law of the French Tax Grouping Regime
  • July 13, 2015 | Authors: Nicolas Andre; Siamak Mostafavi
  • Law Firm: Jones Day - Paris Office
  • On June 11, 2015, Advocate General Kokott rendered her opinion in the context of the preliminary ruling requested before the European Court of Justice (ECJ) by the Appeal Court of Versailles (CAA Versailles, July 29, 2014, n° 12VE03691, Sté Groupe Stéria) with respect to the compliance of the French tax grouping regime with the freedom of establishment principle (see French Tax Update of November 2014).

    The Advocate General concluded that the French tax grouping regime infringes the freedom of establishment principle because a domestic group of companies can obtain certain tax benefits, such as the absence of a taxable 5 percent add-back on dividends distributed within a French tax grouping, which is not available to companies that are residents of other EU Member States and which cannot be included in a French tax grouping.

    Interestingly, the Advocate General rejected the arguments presented by the Member States' governments and considered that such restriction to the freedom of establishment principle is not justified by (i) the fact that the 5 percent add-back results from Article 4-2 of the EU Parent Subsidiary Directive ; (ii) the preservation of the allocation of taxing powers between Member States ; or (iii) the need to preserve the coherence of the tax system.

    In light of this favorable opinion, taxpayers should therefore consider preserving their positions as early as possible by filing refund claims and objections with respect to corporation taxes paid during the two last years.