Judgment of the Court (Fourth Chamber) of 23 October 2008 (reference for a preliminary ruling from the Bundesfinanzhof — Germany) — Finanzamt für Körperschaften III in Berlin v Krankenheim Ruhesitz am Wannsee-Seniorenheimstatt GmbH

(Case C-157/07) (1)

(Freedom of establishment - European Economic Area Agreement (EEA) - Tax legislation - Tax treatment of losses incurred by a permanent establishment situated in a Member State of the EEA and belonging to a company having its seat in a Member State of the European Union)

(2008/C 313/08)

Language of the case: German

Referring court

Bundesfinanzhof

Parties to the main proceedings

Applicant: Finanzamt für Körperschaften III in Berlin

Defendant: Krankenheim Ruhesitz am Wannsee-Seniorenheimstatt GmbH

Re:

Reference for a preliminary ruling — Bundesfinanzhof — Interpretation of Article 31 of the Agreement on the European Economic Area (OJ 1994 L 1, p. 1) — Double taxation convention which provides for taxation of profits made by a branch office in the State where it is established — Deduction from taxable profit of company principal office of branch office losses — No possibility for branch office to carry over fiscal losses to a subsequent period of assessment — Reintegration by State where company principal office established of total deducted losses of branch office

Operative part of the judgment

Article 31 of the Agreement on the European Economic Area of 2 May 1992 does not preclude a national tax system which, after having allowed the taking into account of losses incurred by a permanent establishment situated in a State other than the one in which its principal company is situated, for the purposes of calculating the tax on that company's income, provides for a tax reintegration of those losses at the time when that permanent establishment makes profits, where the State where that same permanent establishment is situated does not confer any right to carry forward losses incurred by a permanent establishment belonging to a company established in another State, and where, under a convention for the prevention of double taxation between the two States concerned, the income of such an entity is exonerated from taxation in the State in which the principal company has its seat.

(1)  OJ C 129, 9.6.2007.