The European Court of Justice just ruled, in a decision of June 12, 2014 (ECJ case C-40/13), that the Dutch tax consolidation regime which forbids to include in a tax group two Dutch resident sister companies held by a common parent entity residing in another EU Member State that does not have a permanent establishment in the Netherlands, constitutes a restriction to the freedom of establishment.

The ECJ thus extends to sister companies the rationale it upheld in the Papillon case law (ECJ, case. C-418/07 of November 27, 2008) which aimed to not make a tax consolidation regime dependent upon a shareholding within a single EU Member State.

The ECJ has indeed considered that the prohibition of tax consolidation of Dutch sister companies held through a common EU parent company was not justified by an objective difference of situation nor by an overriding reason in the public interest, such as the need to preserve the coherence of the tax system namely with respect to the prevention of the double use of losses.

Since the possibility of integrating French sister companies held through a common EU parent company is validated by the ECJ, this decision should allow some groups to elect retroactively for the French group relief if such election is in their best interest (offset of profits against losses, neutralization of intragroup transactions, etc.) and file tax claims accordingly, much like the opportunities opened in the aftermath of the Papillon decision, and within the time-limit provided for in Article L. 190 of the Book of Tax Procedures .