The Court of Justice of the European Union (CoJ) revoked a decision cancelling the transferability of tax losses in Germany. According to the CoJ, losses incurred by permanent establishments may be credited against the profits of Danish companies in the consolidated regime. More information is available in the international tax news.
CJEU overturns decision against German loss carry-forward rules
In its June 28 decision in Dirk Andres (Case C-203/16) the CJEU said the General Court incorrectly found in 2016 that the German scheme for the carry-forward of tax losses for companies in difficulty amounted to illegal state aid. In December 2017 Advocate General Nils Wahl recommended that the CJEU overturn the General Court’s decision. Under German law, the losses of undertakings subject to corporation tax over the course of a tax year may be carried forward to later tax years, with the losses being subtracted from taxable income in those years. ¨
CJEU rules PE losses may be used to offset profits in Danish joint taxation companies
On 4 July 2018, the Court of Justice of the European Union (CJEU) issued a decision concluding that a Danish anti-avoidance rule designed to prevent the double deduction of losses violates EU law. The rules at issue primarily provide for losses of a Danish resident permanent establishment (PE) of a non-resident company to be deducted from the taxable income of the non-resident company in the jurisdiction in which that company is a resident. Where that jurisdiction does not permit the offset of losses, they may be deducted in Denmark from the taxable income of affiliated companies under the Danish joint taxation regime. According to the court, this rule is incompatible with the freedom of establishment principle in the Treaty on the Functioning of the European Union (TFEU). The court followed the Advocate General’s opinion released on 21 February 2018.
EU Code of Conduct group concludes on Luxembourg IP regime
On 6 July 2018, the Code of Conduct Group (the Group) published its decision 10931/18 under the standstill review process regarding Luxembourg’s draft law relating to the tax regime for intellectual property. The Group concluded that the Luxembourg IP regime in light of the Code of Conduct criteria should be considered overall not to be harmful.
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