Part 1 - AL-Tax

Chapter 9evolution, in which the principles of tax neutrality, rollover relief, and nonrecognitionof gains/losses of qualified transactions have predominated. Tax convergencehas been favored by the EC Merger Directive (90/434/EEC), which providedharmonized tax rules for cross-border corporate reorganizations based on the taxneutrality model. However, the implementation of the Merger Directive has generatedvarious domestic tax mechanisms which were partially different from themodel. For this reason, two new EC Directives (Directive 19/2005/CE amendingDirective 90/434/EEC and Directive 2005/56/CE on cross-border mergers of limitedliability companies) have been introduced to fill the gap. At present, however, bothDirectives still have to be implemented by EU countries.The problems relating to consolidated corporate taxation have traditionallyevolved nationally (intra-system evolution). Such an evolution has created fourdifferent models (fiscal unity, trans-border tax consolidation, group contribution,group relief) that still share the common function of offsetting profit and loss.As shown in Table 9.5, there is partial convergence towards fiscal unity andgroup relief. However, there are still three sources of heterogeneity regardingTable 9.5 Domestic group taxation in the EU (2005)No group relief Intra-group ‘Pooling’ of result Full taxloss transfer of a group consolidation● Belgium ‘Group relief’ ● Denmark ● ‘Fiscale eenheid’ in● Czech Republic ● Ireland ● Germany the Netherlands● Greece ● Cyprus ● Spain● Lithuania ● Malta ● France● Slovakia ● UK ● Italy● (Estonia) ‘Intra-group● Luxembourgcontribution’● Austria● Latvia● Poland● Finland● Portugal● Sweden● SloveniaNo loss Every group member is Each group member Legal personality of eachcompensation taxed separately; Losses determines its tax group member is disregardedavailable, namely a may be transferred on base, which is then for tax purposes; Profits/lossesgroup of companies a definitive basis from pooled at the level of subsidiaries are treated as ifis disregarded for one group member to of the parent realized by the parenttax purposes. another. company. company.Source: Commission of the European Communities (2005).231