In its June 12, 2014 decision, the Court of Justice of the European Union (case 40/13) ruled on the issue of the extent to which the ban on forming a "horizontal" tax-conslidated group between subsidiaries that are residents of the same country and are held by a parent company that is not a resident of such country is contrary to the freedom of establishment within the meaning of Articles 43 and 48 of the TFEU.
In this case, sister companies established in the Netherlands, held directly or indirectly by a parent company established in Germany, wished to benefit from the Dutch single tax entity regime.
As the Dutch tax authorities had refused to apply this regime to them, the Dutch companies sued in local courts to enforce their rights.
As the case had an international element to it, the Dutch courts asked the CJEU a preliminary question, regarding whether the Dutch group tax regime complied with EU law. Much like the French tax consolidation regime, the Dutch regime does not apply to groups whose parent companies are not established in the Netherlands.
In its June 12, 2004 decision, the Court of Justice adopted the Advocate General's opinion and ruled that the Netherlands had violated EU law, and specifically the freedom of establishment, by refusing to allow sister companies to form a single tax entity based on the fact that their parent company was not established in the Netherlands.
Indeed, the Court of Justice ruled that this obstacle discriminated against EU situations as opposed to purely national situations and, therefore, that it was unjustified.
This groundbreaking decision could have an impact on other EU countries' tax integration regimes, including the tax group regime under French law, and it could considerably strengthen this regime's attractiveness, begun by the 2008 Papillon decision.
French legislation on the tax consolidation regime could very well be modified to redefine how groups may be formed.
For current and past situations, European groups with several subsidiaries in France without a joint holding company in France may very well wish to assess whether they want to file tax claim based on this groundbreaking case. So as to benefit from the tax integration regime for the fiscal year ended on December 31, 2011, these claims will have to be filed before the end of 2014.
Lastly, this decision could very well open up the way to a tax integration regime between "cousin" companies (companies with a common grandparent company located in the European Union), although the CJEU has not yet been asked this question explicitly.