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Countries Can Deny Deductions of Foreign Losses, EU Court Says

Sept. 22, 2022, 5:04 PM

EU law allows member countries to deny deductions to domestic entities for final losses of a foreign permanent establishment, provided the countries waived their power to tax the establishment’s profits under a double tax treaty, the European Court of Justice ruled Thursday.

The ruling is significant as it clarifies that a German company can’t use the losses of a foreign permanent establishment if the establishment is located in a country with which Germany concluded a double tax treaty featuring the exemption of income, said Arne Schnitger, partner at PwC Germany.

However, questions may persist as the Sept. 22 ruling ...