In its decision of October 2, 2009, the Dutch Supreme Court rejected the cross-border setting off of a loss between a profitable parent company based in the Netherlands and its loss-making German subsidiary. Citing the European Court of Justice’s (“ECJ’s”) ruling of May 15, 2008, in the Lidl case, the Supreme Court ruled that it is consistent with Community law to refuse to allow such a deduction of a loss in the Netherlands
The only question addressed in the October 2, 2009, decision was whether or not cross-border loss set-off was possible. The taxpayer was not a cross-border fiscal unity and had not requested to become one. This decision did not, therefore, address the separate issue of whether or not it is possible to form a cross-border fiscal unity, an issue which the ECJ is currently considering
Issues for the ECJ
The ECJ is currently examining whether or not it is possible to form a cross-border fiscal unity. The Dutch Supreme Court submitted this matter to the ECJ for a preliminary ruling, in relation to earlier proceedings in which the Dutch Revenue had denied a cross-border loss set-off between a profitable parent company based in the Netherlands and its loss-making Belgian subsidiary. On July 11, 2009, The Supreme Court specifically asked the ECJ whether or not the Dutch refusal to allow a cross-border fiscal unity to be formed was consistent with Community law. Because the Supreme Court focused on a separate issue in its October 2, 2009, decision, it is of little aid in deducing the outcome of the proceedings currently before the ECJ.