Case C‑650/16

A/S Bevola
and
Jens W. Trock ApS

v

Skatteministeriet

(Request for a preliminary ruling from the Østre Landsret)

(Reference for a preliminary ruling — Article 49 TFEU — Corporation tax — Freedom of establishment — Resident company — Taxable profits — Tax relief — Deduction of losses incurred by resident permanent establishments — Authorised — Deduction of losses incurred by non-resident permanent establishments — Excluded — Exception — Optional scheme of international joint taxation)

Summary — Judgment of the Court (Grand Chamber), 12 June 2018

Freedom of establishment — Tax legislation — Corporation tax — Tax relief — National legislation allowing a resident company to deduct losses incurred by its permanent establishment in that company’s Member State but excluding deduction of losses definitively incurred by a permanent establishment in another Member State — Exception authorising deduction where an optional scheme of international joint taxation applies — Not permissible

(Art. 49 TFEU)

Article 49 TFEU must be interpreted as precluding legislation of a Member State under which it is not possible for a resident company which has not opted for an international joint taxation scheme, such as that at issue in the main proceedings, to deduct from its taxable profits losses incurred by a permanent establishment in another Member State, where, first, that company has exhausted the possibilities of deducting those losses available under the law of the Member State in which the establishment is situated and, second, it has ceased to receive any income from that establishment, so that there is no longer any possibility of the losses being taken into account in that Member State, which is for the national court to ascertain.

The Court has held that, as regards measures laid down by a Member State in order to prevent or mitigate the double taxation of a resident company’s profits, companies which have a permanent establishment in another Member State are not, in principle, in a comparable situation to that of companies possessing a resident permanent establishment (see, to that effect, judgments of 17 July 2014, Nordea Bank Danmark, C‑48/13, EU:C:2014:2087, paragraph 24, and of 17 December 2015, Timac Agro Deutschland, C‑388/14, EU:C:2015:829, paragraph 27).

However, as regards losses attributable to a non-resident permanent establishment which has ceased activity and whose losses could not, and no longer can, be deducted from its taxable profits in the Member State in which it carried on its activity, the situation of a resident company possessing such an establishment is not different from that of a resident company possessing a resident permanent establishment, from the point of view of the objective of preventing double deduction of the losses.

The criterion of the definitive nature of the losses, within the meaning of paragraph 55 of the judgment of 13 December 2005, Marks & Spencer (C‑446/03, EU:C:2005:763), was explained in paragraph 36 of the judgment of 3 February 2015, Commission v United Kingdom (C‑172/13, EU:C:2015:50). It follows that the losses incurred by a non-resident subsidiary may be characterised as definitive only if that subsidiary no longer has any income in its Member State of residence. So long as that subsidiary continues to be in receipt of even minimal income, there is a possibility that the losses sustained may yet be offset by future profits made in the Member State in which it is resident.

It follows from that case-law, which may be applied by analogy to the losses of non-resident permanent establishments, that the losses attributable to a non-resident permanent establishment become definitive when, first, the company possessing the establishment has exhausted all the possibilities of deducting those losses available under the law of the Member State in which the establishment is situated and, second, it has ceased to receive any income from that establishment, so that there is no longer any possibility of the losses being taken into account in that Member State.

(see paras 37, 38, 63, 64, 66, operative part)