European Court justifies freedom of establishment breach
February 03, 2010
The European Court of Justice (ECJ) has upheld a discrepancy in Belgium’s transfer pricing rules, even though it represents a restriction on the EU freedom of establishment.
In Societe de Gestion Industrielle (SGI) v Belgium (C-311/08) the ECJ found that Belgium’s different treatment of cross-border and domestic transactions where an unusual or gratuitous benefit is granted between interdependent companies was a restriction on the freedom of establishment, but could be justified. The treatment, it said, was merited to preserve a balanced allocation of member states’ taxing rights and to prevent tax avoidance.
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