Tax Notes Int’l

Type: Articles Published

Advocate General Cruz Villalón of the European Court of Justice on February 28 issued his opinion in Crédit Lyonnais (C-388/11), a French case on the VAT treatment of income from foreign branches. (The opinion has not been published in English.)

The French Administrative Supreme Court had submitted a reference for a preliminary ruling by the ECJ in the Crédit Lyonnais case, asking several questions about the calculation of the VAT-deductible proportion of the bank’s income tax liability and the inclusion of its overseas branches’ turnover in light of the interpretation of the neutrality principle.

Case Background

Following a tax audit covering the period from January 1, 1988, to December 31, 1989, the company Le Crédit Lyonnais (LCL), which is headquartered in France, has been reassessed for VAT and payroll tax on the basis that it wrongly took into account the amount of interest on loans to its branches in other EU member states or in third countries in the VAT-deductible proportion of its taxable income referred to in article 212 of Annex II of the French Tax Code.

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