La Mancha Group – Federal Court of Australia finds that an absorptive merger of a Dutch into a Lux company rendered the Lux survivor as the “taxpayer” for continuing or launching objections
A condition precedent to the merger of a Netherlands private limited company (“LMGI”) into its sister company (“LMA”), which was a Luxembourg private limited liability company (with LMA as the survivor) was that the Federal Court of Australia confirm that LMA as legal successor would be able to exercise all objection or appeal rights in relation to current and pending assessments of LMGI’s taxation years by the Australian Commissioner. Before providing such declaration, Davies J stated, based on the expert law testimony:
Under European law, Luxembourg law and Dutch law, pursuant to the principle of universal succession … all liabilities of LMGI to tax, including under foreign law (that is, the relevant Australian tax acts), will transfer to LMA by operation of law pursuant to the principle of universal succession upon completion of the merger, as will the rights and obligations of LMGI in respect of such tax liabilities … .
After summarizing the relevance of the character of the merger under such foreign law to the Australian common law choice of law rules, she stated:
In consequence, the tax liabilities of LMGI will be assumed by LMA as a result of the merger. Moreover, LMA, as the “taxpayer” under s 175A of the Income Tax Assessment Act 1936 (Cth) … will be entitled to object against assessments which have been issued to LMGI, or which are issued to LMA in its place, and will be “the person” entitled to appeal … in relation to objections from those assessments … . Although those liabilities and obligations (on the one hand) and rights and capacities (on the other) arise under Australian law and are governed by Australian law, Australian law will recognise the operation of Dutch and/or Luxembourg law following the merger as having clothed LMA with the necessary attributes or identity to subject it to those obligations and liabilities and to enable it to exercise those rights and capacities for the purposes of Australia’s tax acts.
Although the parent of the two merging companies was a Luxembourg public limited company, if the parent had been a Canco, the description of the merger suggests that it could have qualified as a foreign merger under ss. 87(8) and (8.2).
Neal Armstrong. Summary of La Mancha Group International B.V. v Commissioner of Taxation  FCA 1799 under s. 165(1).