Europe’s highest court ruled Tuesday that countries could not go after profits earned by subsidiaries in other European countries as long as the businesses were not “artificial” arrangements to avoid paying taxes.
While potentially painful for high-tax countries like Germany, France and Italy, lawyers said the landmark decision could help promote European integration by making cross-border expansion more attractive.
In a case brought by Cadbury Schweppes, the soft-drink and candy maker, the European Court of Justice in Luxembourg said that national laws restricting the ability of a company to set up a foreign subsidiary in a lower-tax country were justified only when those operations were “wholly artificial arrangements.”
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