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Marks And Spencer Victorious In ECJ

by Ulrika Lomas, for LawAndTax-News.com, Brussels

14 December 2005


Ruling on Tuesday, the European Court of Justice announced that UK retailer Marks & Spencer can claim tax relief for losses outside its home market, with the proviso that the loss-making subsidiaries are unable to claim tax relief in their country of establishment.

M&S successfully argued that UK provisions on group tax relief are in breach of European law, as they prevent an EU-based parent company from offsetting losses incurred by subsidiary companies in other member states, thus violating the principle of freedom of establishment.

In a statement, the ECJ confirmed that:

"Where in one Member State the resident parent company demonstrates to the tax authorities that those conditions are fulfilled, it is contrary to freedom of establishment to preclude the possibility for the parent company to deduct from its taxable profits in that Member State the losses incurred by its non-resident subsidiary,"

This judgement is expected to lead to a further depletion of state coffers in many EU members to the tune of hundreds of millions, as other European retailers follow suit.

A summary of the ECJ Judgement in the Marks & Spencer case can be accessed via the Tax News Resources section.

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