A/S Bevola Applies Marks & Spencer to the Losses of a Foreign Permanent Establishment

03 July 2018
Author: JHA

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:


  1. Fidelity Funds: Danish Withholding Tax on Dividends Breaches EU Law
  2. Hornbach-Baumarkt v Finanzamt Landau: German Transfer Pricing Legislation Is Compatible with Freedom of Establishment
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