This article analyses the principle of neutrality in establishment law, particularly in connection with the allocation of the powers of taxation. A provision - section 8(2) - has been inserted into the Danish Act on Corporation Tax that provides neutrality in the choice between a subsidiary and a permanent establishment abroad. The provision was inserted in order to secure equal tax treatment of groups with joint taxation, but the rule would appear to present a series of problems in Community law in that situations that are not analogous are treated alike, which is contrary to the basic principle of establishment law unless justified in an overriding public interest. With the decision in Case C-337/08, this would appear not to be the case, and this article argues that internal and external situations should not be assessed according to identical definitions of neutrality.
Intertax