The Finnish Supreme Administrative Court (SAC) issued a ruling on 30 December 2011 in which it decided to request for a preliminary ruling of the European Court of Justice (ECJ) on whether the dispensation procedure relating to the possibility of using tax losses after a qualified change in ownership could be deemed as an illegal state aid (see Legal Alert 4 Jan 2012 – Finnish Tax Loss Dispensation Procedure to be Evaluated by the European Court of Justice).
The Advocate General has issued its recommendation concerning the said question on 7 February 2013. In the recommendation, the tax loss dispensation procedure was characterized as an alleged state aid in force as provided in the Section 1 of Article 108 of Treaty of the Functioning of the European Union (TFEU), although the Advocate General specifically acknowledged the factor that the final character of the state aid was not addressed. Based on this classification, the provisions can be applied domestically unless the European Commission has made a decision in accordance with Article 13 of Decree 659/1999 and initiated court proceedings in accordance with Section 2 of Article 108 of TFEU. Should this be the case, the state aid which is finally deemed illegal could be claimed to be returned.
Although the recommendation made by the Advocate General is not binding towards the ECJ, the possibility of treating the current dispensation procedure as a state aid shall be considered. On the other hand, based on the Advocate Generals recommendation, it is still not certain whether the procedure is a state aid at all, which could be seen as a slightly supporting factor to the future applicability of the current dispensation procedure.
The final national treatment concerning pending tax loss dispensation applications as well as the future of the dispensation procedure shall be finally determined by the answers of the ECJ to the questions referred to in the case SAC 2011:118. However, it shall be highlighted that the tax loss dispensation procedure is currently in force as it is and, thus, dispensations may still be granted. Due to the possible later abolishment of the dispensation procedure, we recommend filing the dispensation applications as soon as possible so that the applications become pending under the current dispensation procedure.