The Finnish implementation of the final losses doctrine as developed in EU case-law

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School of Business | Master's thesis
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The issue of this thesis boils down to the EU and a more harmonized internal market. The EU aims towards a more borderless internal market, which also means that fiscal barriers need to be torn down, within the limits of the law. This thesis examines when the cross-border deduction of losses is to be allowed by a Member State, being in exceptional cases when a subsidiary’s losses are final, as defined by CJEU case-law (Marks & Spencer II onwards until Memira Holding and Holmen AB). CJEU case-law has evolved and the definition of final losses have been clarified by various case-law, and the doctrine has been extended to cover cross-border mergers, group contribution, foreign branches and subsidiaries resident within the EEA. As EU case-law is applicable also in Finland, Finland have had to implement the final losses doctrine in national law as well. Finnish case-law has evolved since the Marks & Spencer II case but yet it seems close to impossible to demonstrate the existence of final losses in Finland. This was confirmed by the five Supreme Administrative Court’s cases issued in May 2020, where the court found, in all five cases, that the Finnish parent company, being the applicants, had not successfully demonstrated that the subsidiaries losses are in fact final, despite the finality of the losses being accepted in all instances before the Supreme Administrative Court. Finland implemented a new law, the Act on Group Deduction, applicable as of 2021, whereby a Finnish parent company may deduct its foreign subsidiary’s final losses in Finland for the parent company’s Finnish tax purposes. However, in light of the five aforementioned Supreme Administrative Court’s cases, the question arises whether it currently is possible to demonstrate the finality of a foreign subsidiary’s losses. In the Government proposal for the Act on Group Contribution, the final losses concept is to be the definition as set out in CJEU case-law. Interestingly enough, other EU Member States have been successful in allowing its nationals to deduct its foreign subsidiary’s final losses for the parent company’s tax purposes, but in Finland this seems to yet be unsolved. The question also arises whether Finland is yet in breach of EU law when setting the burden of proof impossibly high. This standpoint could be argued in light of the CJEU case San Giorgio. Another route could be to make a formal complaint to the European Commission arguing that Finland is in breach of EU law (and hence the principles in San Giorgio) when setting the burden of proof for final losses unreasonably high.
Thesis advisor
Scherleitner, Moritz
Weckström, Jouni
EU law, final losses, Memira Holding, Marks & Spencer
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