A/S Bevola Applies Marks & Spencer to the Losses of a Foreign Permanent Establishment
In A/S Bevola and Jens W. Trock ApS v Skatteministeriet (C-650/16) the CJEU applied its findings in Marks & Spencer (C-446/03) to the losses of a foreign permanent establishment, and confirmed that such losses can be deducted from the profits of a parent company based in a different Member State.
A/S Bevola, a Danish incorporated company, had incurred losses in its Finnish establishment which it wanted to deduct from its taxable income in Denmark, but this was refused by the Danish tax authorities. The question before the CJEU was whether Danish law breached freedom of establishment by not allowing the deduction of losses of a non-Danish permanent establishment.
The CJEU held that there was a difference in treatment between a Danish company with a foreign permanent establishment and one with a Danish permanent establishment. This difference in treatment amounted to a restriction on the freedom of establishment as the two situations were objectively comparable. The court observed that the decision in Marks & Spencer on the losses of foreign subsidiaries was also applicable to the definitive losses of permanent establishments. It was contrary to EU law to exclude the possibility for a resident parent company of deducting losses incurred by its non-resident subsidiary, where the subsidiary had exhausted the possibilities of having those losses taken into account in its state of establishment.
This article appears in the JHA June 2018 Tax Newsletter, which also features:
- Fidelity Funds: Danish Withholding Tax on Dividends Breaches EU Law
- Hornbach-Baumarkt v Finanzamt Landau: German Transfer Pricing Legislation Is Compatible with Freedom of Establishment
The End is Nigh for the Non-Dom Regime
Published in ThoughtLeaders4 Private Client Magazine, Helen McGhee expert analysis of the current state of non-dom tax regime and it's future.
HMRC Makes Changes to COP9
On 14 June 2023, HMRC published a substantially rewritten Code of Practice 9 (“COP9”). Helen McGhee and Megan Durnford set out the key changes implemented as a result of this publication.
Pandora Papers: HMRC issues nudge letters
The Pandora Papers leak of almost 12m documents back in 2021 purportedly exposed the secret accounts and dealings (including potential tax evasion/ avoidance and money laundering) of 35 world leaders (including the late HM Elizabeth II), as well as many politicians and billionaires. The data was obtained by the International Consortium of Investigative Journalists in Washington DC and led to one of the biggest ever global financial investigations.
Increased Investment in Personal Tax Compliance in the UK (Published in Thought Leaders 4 Private Client)
Advances in technology and increased international fiscal co-operation have made global personal tax compliance initiatives pop up in abundance in recent years. To compound the issue, the Russian invasion of Ukraine and the corresponding economic fallout prompted domestic governments to increase transparency in relation to investments held by wealthy foreign individuals (with a focus on oligarchs).
In the UK, in the context of the cost-of-living crisis, public opinion certainly seems to be in favour of increased accountability for high-net-worth individuals (eg, on 9 October 2022, 63% of Britons surveyed thought that “the rich are not paying enough and their taxes should be increased”).1
HMRC is one of the most sophisticated tax collection authorities in the world and the department is making significant investments in technology in the field of compliance work; they are well placed to take advantage of new international efforts to increase tax compliance, particularly considering the already extensive network of 130 bilateral tax treaties in the UK (the largest in the world).2 The UK was also a founding member of the OECD’s Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC) forum.
This article discusses the main developments in support of the increased focus on international transparency and personal tax compliance in the UK. There are other international fiscal initiatives, particularly in the field of corporate taxation, but such initiatives are beyond the scope of this article.
It should be noted that a somewhat piecemeal approach, with constant tinkering makes compliance difficult for the taxpayer and is often criticised for lacking the certainty that a stable tax system needs to thrive.
This article was first published with ThoughtLeaders4 Private Client Magazine
Tax-Related Measures in the Autumn Statement 2022
On 17 November 2022, the Rt Hon Jeremy Hunt MP, the Chancellor of the Exchequer, unveiled the contents of the Autumn Budget 2022. This comes after the International Monetary Fund (IMF) published its world economic forecast on 11 October 2022. The IMF expects the British economy to grow 3.6% in 2022 and 0.3% in 2023. Other major developed economies are also expected to stagnate next year, namely Spain (1.2%), the US (1.0%), France (0.7%), Italy (-0.2%) and Germany (-0.3%).
This note focuses on tax measures included as part of that statement.