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Concept of European group of companies (2006)

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There are groups of companies under company law with a separate legal existence. Majority of them are owned, directly or indirectly, by the same company. It may be a non-majority controlled by another company (directly or indirectly) and that company is called parent company or group head. These large groups of companies are essential for contemporary business life, in that they are inspired by economic logic. These groups of companies cannot let the tax legislator remain indifferent, since it is necessary for the economy to promote the creation of such superstructures. Thus, its purpose is to seek tax neutrality, which prevents any interference with the choice of legal and business entrepreneurs.

Tax concessions - called group or parent companies/subsidiaries- have been implemented by States. We will focus specifically on two of these factors: the English and the French rule. Under the English system, the ?group relief' is offered. The scheme established by the legislature allows a British company in a group to divest its losses to another group company, which can then be used to deduct from its taxable income. Therefore the transferor loses the right to use them for tax purposes. The system of group relief laid down in Article 402 of the Income and Corporation Taxes Act (ICTA) is however subject to one condition: the company must be resident in the UK, or is carrying on business in the United Kingdom through a branch or agency.

The French scheme of tax consolidation has an integration of tax regime under Section 223A. It follows the Internal Revenue Code that allows a corporation to assume sole liability of the corporation tax due on all groups formed by it and companies which it owns at least 95% of capital. However, this possibility is open only to companies subject to corporation tax, then living in France. Both systems pose a number of problems with their compatibility with Community law. The concept of European group tax is relatively small. The State Council has further restricted the concept of a European group, in that it decides that the main principles of Community law do not apply since they do not follow its application.

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