On 11 June 2015, an opinion of Advocate General (AG) Kokott on whether certain French group tax rules violate freedom of establishment was published on the site of the Court of Justice of the European Union (CJEU). The opinion is in regard to a case being dealt with by the Versailles Administrative Court of Appeal concerning a French company seeking to deduct a 5% proportion for costs and expenses that would be allowed for dividends from a French subsidiary but not from a non-resident subsidiary.

The question referred to the CJEU by the French Court was essentially whether the freedom of establishment provisions of the Treaty on the Functioning of the EU (TFEU) preclude the French group taxation rules that enable a parent company to neutralize the add-back of the proportion of costs and expenses, fixed at 5% of the net amount of dividends received by it from resident companies included within the tax group, when such a right is refused if the dividend paying group company is resident in another EU Member State.

In the opinion, the AG found that the freedom of establishment under Article 43 EC (now Article 49 TFEU) and Article 48 EC (now Article 54 TFEU) precludes legislation of a Member State which under a special rule on group taxation available only to domestic companies allows group companies to deduct the charges relating to holdings in other group companies when this deduction is otherwise excluded.

Click the following link for the full AG opinion as published.