A long awaited decision was made today by the European Court of Justice (ECJ) in the case of Bosal Holdings, a Netherlands-based steel manufacturer.
The ECJ has ruled in favour of Bosal - as a result of which expenses relating to foreign subsidiaries should become tax deductible, not just in the Netherlands, but across the EU, EEA and EU accession states. This decision is expected to have far reaching consequences for firms with subsidiaries across Europe.
The Bosal Holdings case establishes the principle that you cannot make a tax benefit for a parent (in this case the right to deduct interest) conditional on whether or not you are also able to tax the subsidiary. As a result of this case, the Inland Revenue can expect a flood of claims from UK companies for cross-border loss-relief, tax-free foreign source dividends, capital gains deferral and other tax advantages normally reserved for the parents of UK groups.
