Opinion Statement ECJ-TF 1/2021 on the ECJ Decision of 20 January 2021 in Lexel AB (Case C-484/19) Concerning the Application of the Swedish Interest Deductibility Rules

European Taxation, vol. 61, n. 6 (2021) [ISSN: 2352-9199]

7 Pages Posted: 11 Sep 2021 Last revised: 15 Sep 2021

See all articles by Francisco Alfredo Garcia Prats

Francisco Alfredo Garcia Prats

Universitat de València

Werner C. Haslehner

Universite du Luxembourg

Volker Heydt

Independent

Eric Kemmeren

Tilburg University; Fiscal Institute Tilburg

Georg Kofler

Vienna University of Economics and Business - Institute for Austrian and International Tax Law

Michael Lang

Vienna University of Economics and Business

João Félix Pinto Nogueira

International Bureau of Fiscal Documentation; University of Cape Town (UCT)

Christiana HJI Panayi

Queen Mary University of London, School of Law

Emmanuel Raingeard de la Blétière

Independent

Stella Raventos-Calvo

Asociación Española de Asesores Fiscales (AEDAF)

Isabelle Richelle

Independent

Alexander Rust

Independent

Rupert Shiers

Independent

Date Written: June 30, 2021

Abstract

This is an Opinion Statement prepared by the CFE ECJ Task Force1 on Case C-484/19, Lexel AB, in which the Court of Justice of the EU (First Chamber) (ECJ) delivered its judgment on 20 January 2021. The ECJ rendered its judgment without an opinion of an Advocate General. The case concerned the Swedish interest deductibility rules. In Sweden, interest payments are generally deductible. As an exception to this rule, interest payments made to an associated company are generally not deductible. Interest may be deductible, however, if the underlying debt is justified on commercial grounds. Interest payments between two Swedish associated companies are always deductible due to the intra-group financial transfer system. The ECJ had to decide whether the different treatment of interest payments made to other EU companies and interest payments made to Swedish companies can be justified by overriding reasons in the general interest. The ECJ held that the Swedish rules were not compatible with the freedom of establishment. It held that the different treatment could neither be justified by the need to fight against tax evasion and tax avoidance nor by the need to maintain a balanced allocation of the power to impose taxes between the Member States. In addition, the Court also stated that even if the transaction in question represents a purely artificial arrangement, the principle of proportionality requires that interest payments which are in line with the arm’s length principle must be deductible. The judgment is of particular interest as many EU Member States have introduced similar interest deductibility rules, and also for the proposed Source State rules in the Pillar 2 Blueprint of the OECD.

Keywords: Taxation, Tax law, European taxation

JEL Classification: K33, K34, F13, E62, D78, E62, F02, F23, F42, H20, H22, H23, H25, H26, H87, O19, O23, O24

Suggested Citation

Garcia Prats, Francisco Alfredo and Haslehner, Werner Christof and Heydt, Volker and Kemmeren, Eric and Kofler, Georg and Lang, Michael and Pinto Nogueira, João Félix and HJI Panayi, Christiana and Raingeard de la Blétière, Emmanuel and Raventos-Calvo, Stella and Richelle, Isabelle and Rust, Alexander and Shiers, Rupert, Opinion Statement ECJ-TF 1/2021 on the ECJ Decision of 20 January 2021 in Lexel AB (Case C-484/19) Concerning the Application of the Swedish Interest Deductibility Rules (June 30, 2021). European Taxation, vol. 61, n. 6 (2021) [ISSN: 2352-9199], Available at SSRN: https://ssrn.com/abstract=3877278

Werner Christof Haslehner

Universite du Luxembourg ( email )

Luxembourg

Volker Heydt

Independent

Eric Kemmeren

Tilburg University ( email )

Warandelaan 2
Tilburg, Noord-Brabant 5037AB
Netherlands
+31.13.466.8129/2412 (Phone)
+31.13.466.3073 (Fax)

HOME PAGE: http://www.tilburguniversity.edu/webwijs/show/kemmeren-3.htm

Fiscal Institute Tilburg ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31.13.466.8129/2412 (Phone)
+31.13.466.3073 (Fax)

HOME PAGE: http://www.tilburguniversity.edu/webwijs/show/kemmeren-3.htm

Georg Kofler

Vienna University of Economics and Business - Institute for Austrian and International Tax Law ( email )

Welthandelsplatz 1
Buildind D3
Vienna, VIenna 1020
Austria

Michael Lang

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

João Félix Pinto Nogueira (Contact Author)

International Bureau of Fiscal Documentation ( email )

Rietlandpark, 301
Amsterdam, 1019 DW
Netherlands
+31205540100 (Phone)

HOME PAGE: http://https://www.ibfd.org/IBFD-Profiles/Jo-o-F-lix-Pinto-Nogueira

University of Cape Town (UCT) ( email )

Private Bag X3
Rondebosch, Western Cape 7701
South Africa

Christiana HJI Panayi

Queen Mary University of London, School of Law ( email )

67-69 Lincoln’s Inn Fields
London, WC2A 3JB
United Kingdom

Stella Raventos-Calvo

Asociación Española de Asesores Fiscales (AEDAF) ( email )

Spain

Isabelle Richelle

Independent

Alexander Rust

Independent

Rupert Shiers

Independent

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