Publications Description

CFE has published an Opinion Statement prepared by the CFE ECJ Task Force on the CJEU decision of January 20, 2021, in Case C-484/19, Lexel AB, concerning the application of Swedish interest deductibility rules.

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.

We invite you to read the statement and remain available for any queries you may have.