During the FY 2010, A OY had made a group contribution to another domestic group company. When the 2010 tax assessment was carried out, A OY’s profit from business activities after deducting the group contribution was determined to be EUR 0. The French company B was part of the same group as A OY. For B, a transfer pricing adjustment had subsequently been made whereby an addition of EUR 656,339 was made to B’s taxable income based on payments to A OY. In the arbitration procedure between the French and Finnish authorities under the Arbitration Convention, the said transfer pricing adjustment was considered to be compatible with the arm’s length principle. The Tax Administration implemented the final result of the arbitration procedure by means of a consequential amendment to A OY’s taxation for 2010. An amount of EUR 656,339 was deducted from the company’s income from business activities, but the company was not assessed a loss for the source of acquisition of business activities in accordance with section 6 of the Act on Group Contributions when taxing the maximum amount of deductible group contributions. Judgement of the Supreme Administrative Court The Court held that the taxation carried out in accordance with the final outcome of the arbitration proceedings had been carried out in accordance with the Income Tax Act, i.e. national tax legislation, taking into account the provision in section 135(1) of the Income Tax Act and the purpose of the Arbitration Convention to eliminate double taxation. Since, according to Article 14(a) of the Arbitration Convention, the double taxation of profits is considered to be eliminated if the income is included in the calculation of the taxable income of only one State, the elimination of double taxation must take into account any applicable group taxation system, i.e., for Finland, the consequences of using the group contribution system. Since the outcome of the negotiation between the French and Finnish authorities had been enforced through the arbitration procedure concerning the taxation of A OY, a loss would have to be determined for A OY for the elimination of double taxation in accordance with Article 14(a) of the Arbitration Convention. In view of section 135 of the Income Tax Act, it was not possible to refrain from recognising the loss in taxation on the basis of section 6 of the Act on Group Contributions. Excerpt “33) The issue in the case is whether the company’s loss could be disallowed under Article 6 of the Law on group relief in tax matters after the Tax Administration, by a follow-up amendment of 13 February 2019, implemented the result of the negotiations reached in the mutual agreement procedure under the arbitration agreement. (34) Before the entry into force of the Act on the Procedure for the Settlement of International Tax Disputes, the negotiated result of the mutual agreement procedure under the tax treaty could have been enforced in accordance with the relief procedure referred to in Section 89(3) of the Act on Tax Procedure (1558/1995). However, the present case does not involve a mutual agreement procedure under a tax treaty and no tax has been levied on the company which could be relieved. In addition, in the light of what is stated in the preamble to the Law on tax procedure, cited in paragraph 29 above, concerning the scope of Article 75 of the Law, the result of the negotiations reached in the context of the mutual agreement procedure could, as such, have been implemented by a subsequent amendment under that provision at the initiative of the Tax Administration. (35) The taxation carried out pursuant to an agreement with a foreign State to eliminate or mitigate double taxation under section 135(1) of the Income Tax Act must be deemed to have been carried out in accordance with that Act. (36) The arbitration agreement concerns the elimination of double taxation in connection with the adjustment of income of related companies. In view of the purpose of the arbitration agreement, the tax imposed on the basis of the result of the negotiations under the arbitration agreement must also be deemed to have been imposed in accordance with the Income Tax Act, i.e. national tax law. (37) According to Article 14(a) of the Arbitration Convention, double taxation is deemed to be eliminated if income is included in the calculation of taxable income in only one State. Since the wording of the Arbitration Convention provides that the inclusion of income is to be considered on a State-by-State basis and not on a company-by-company basis, the analysis must take into account the effects of any group tax system applicable in the State eliminating double taxation. In the case of Finland, this means taking into account the effects of the use of the group relief system. (38) The amount of EUR 656 339 in question has been included in the calculation of taxable income in France. If the loss of EUR 656 339 from the source of business income is not confirmed for A Oy and if the tax of the other domestic group company that received a group grant from the company in the 2010 tax year is neither relieved nor corrected, the said amount of EUR 656 339 will also be included in Finland for the calculation of taxable income. Thus, in such a situation, double taxation has not been eliminated within the meaning of Article 14(a) of the Arbitration Convention. (39) Since the Tax Administration has decided to implement the result of the negotiations reached in the mutual agreement procedure between the competent authorities of Finland and France by adjusting the tax of A Oy instead of adjusting the tax of another domestic group company that received a group subsidy, the loss of EUR 656 339 should have been confirmed for A Oy in order to eliminate double taxation within the meaning of Article 14(a) of the Arbitration Convention. In the light of what has been stated in paragraph 36 above, the loss could not have been disallowed under ...