10 September 2001

Group Taxation Domestically and Across Borders within Europe

The FEE Direct Tax Working Party has analysed the concept of group taxation in EU Member States, (both domestically and across borders within Europe). FEE have identified 4 clear recommendations as a result of this Europe-wide analysis.


All Member States should implement the concept of domestic group taxation in general.

– In order to avoid unfair competition between companies in different EU-member states, FEE urges the EU to set minimum standards for group taxation. As a minimum, loss transfer between group companies wholly owned subsidiaries within all countries should be made possible.
– Secondly, elimination of taxation of intragroup transfers within all Member States would be welcomed.

To further assist cross-border trade, and in order to conform to the EU-principle of freedom of establishments, FEE urges the Member States to recognise permanent establishments as the head of fiscal unity. Furthermore, requirements of direct shareholdership need to be extended to include indirect shareholdership, should in order to allow group companies not being in direct line to set-off their losses within one country. Group taxation should apply to all 100% subsidiaries, whether directly or indirectly owned.

– The tax system of Member States should allow group taxation to apply with respect to all subsidiaries in that territory.
– In order to avoid discrimination, permanent establishments of the same foreign parent should be capable of inclusion in the local tax group.

Elimination of taxation of intragroup transfers within all Member States should be implemented to achieve tax neutrality. There should be no precondition that there should be accounting consolidation.

As only two countries allow group taxation of national sister companies held by a foreign parent, FEE feels that this poses a restriction on intra/EU business. FEE recommends that consideration be given to the preparation of guidelines or EU directives encouraging a broader application of taxation rules.

Position Paper



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