A/S Bevola and Jens W. Trock ApS v Skatteministeriet.

• Jurisdiction: European Union
• Court: Court of Justice (European Union)
• Writing for the Court: Bonichot
• ECLI: ECLI:EU:C:2018:424
• Docket Number: C-650/16
• Date: 12 June 2018
• Procedure Type: Reference for a preliminary ruling

Provisional text

JUDGMENT OF THE COURT (Grand Chamber)

12 June 2018 (*)

(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)

In Case C‑650/16,

REQUEST for a preliminary ruling under Article 267 TFEU from the Østre Landsret (High Court of Eastern Denmark, Denmark), made by decision of 12 December 2016, received at the Court on 19 December 2016, in the proceedings

A/S Bevola,

Jens W. Trock ApS

v

Skatteministeriet,

THE COURT (Grand Chamber),

composed of K. Lenaerts, President, A. Tizzano, Vice-President, M. Ilešič, L. Bay Larsen, A. Rosas and J. Malenovský, Presidents of Chambers, J.‑C. Bonichot (Rapporteur), M. Safjan, D. Šváby, A. Prechal, C. Lycourgos, M. Vilaras and E. Regan, Judges,

Advocate General: M. Campos Sánchez-Bordona,

Registrar: R. Schiano, Administrator,

having regard to the written procedure and further to the hearing on 25 October 2017,

after considering the observations submitted on behalf of:

– A/S Bevola and Jens W. Trock ApS, by H. Peytz, advokat,

– the Skatteministeriet, by S. Horsbøl Jensen, advokat,

– the Danish Government, by C. Thorning, acting as Agent, and S. Horsbøl Jensen, advokat,

– the German Government, by T. Henze, acting as Agent,

– the Italian Government, by G. Palmieri, acting as Agent, and G. De Socio, avvocato dello Stato,

– the Austrian Government, by F. Koppensteiner, G. Eberhard and E. Lachmayer, acting as Agents,

– the European Commission, by W. Roels, R. Lyal and S. Maaløe, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 17 January 2018,

gives the following

Judgment

1 This request for a preliminary ruling concerns the interpretation of Article 49 TFEU.

2 The request has been made in proceedings between A/S Bevola and Jens W. Trock ApS, companies incorporated under Danish law, and the Skatteministeriet (Ministry of Finance, Denmark) concerning the Danish authorities’ refusal to allow Bevola to deduct from its taxable income the losses incurred by its Finnish establishment.

Danish law

3 Paragraph 8(2) of the Selskabsskatteloven (Law on corporation tax), as amended by Law No 426 of 6 June 2005, (‘the Law on corporation tax’) provides:

‘Taxable income shall not include income and expenditure relating to a permanent establishment or real property situated in a foreign State, on the Faroe Islands or in Greenland, subject to Paragraph 31A. …’

4 Paragraph 31 of that law states:

‘(1) Group affiliates and associations, etc. …, shall be taxed jointly (national joint taxation). “Group affiliates and associations, etc.” shall be understood to mean companies and associations, etc., which at some point during the fiscal year belong to the same group: see Paragraph 31C. In subparagraphs (2) to (7) real property is equated with permanent establishments. “Ultimate parent company” shall be understood to mean that company which is the parent company without being a subsidiary: see Paragraph 31C.

(2) For jointly taxed companies a joint income statement shall be established, consisting in the sum of the taxable income for each individual company covered by the joint taxation, calculated according to the general rules of the tax legislation, with those exceptions applicable to jointly taxed companies. Losses in a permanent establishment may be offset against other companies’ income only if under the rules in the foreign State, on the Faroe Islands or in Greenland, where the company is resident, losses cannot be included in the calculation of the company’s income statement in that foreign State, on the Faroe Islands or in Greenland, where the company is resident, or if international joint taxation has been chosen under Paragraph 31A. The joint taxation income shall be calculated after offset has been made for each individual company for losses from earlier income periods that can be carried forward. If the joint taxation income is positive, the profit shall be distributed proportionately between the profit-making companies. If the joint taxation income for a fiscal year is negative, the losses shall be distributed proportionately between the loss-making companies and carried forward in the relevant company for offset the following subsequent fiscal year. Losses in a company relating to joint taxation periods can be offset only against profits in that same company. In carrying forward losses, the oldest losses are offset first. Losses in a company relating to earlier fiscal years can be offset against profits in another company only if the losses occurred in a fiscal year in which the relevant companies were taxed jointly and the joint taxation has not subsequently been interrupted.

…

(4) In national joint taxation the top parent company taking part in the joint taxation shall be designated as the management company for the purposes of joint taxation. If there is no Danish taxable top parent company, but a number of horizontally linked Danish taxable affiliated companies, one the affiliated companies taking part in the joint taxation shall be designated as the management company. … The management company shall be responsible for payment of the overall income tax. …

(5) All companies in the joint taxation shall calculate the taxable income for the same period as the management company, irrespective of the accounting year under company law rules: see Paragraph 10(5).

…

(7) In the calculation of the taxable income, a jointly taxed company may opt to ignore losses, including losses carried forward from earlier fiscal years. Losses corresponding to the taxable income in a jointly taxed permanent establishment in Denmark or a jointly taxed subsidiary in Denmark may be ignored when the permanent establishment’s or subsidiary’s income is included in the income statement outside Denmark, provided that the relevant State’s relief for the Danish taxation corresponds to the relief method provided for in Paragraph 33 of the Law on tax assessment (Ligningsloven). The amount ignored shall instead be carried forward to subsequent fiscal years in accordance with the rules in Paragraph 15 of the Law on tax assessment. If an amount lower than the overall losses is ignored, that amount shall be distributed proportionately to the individual loss-making sources.’

5 Paragraph 31A(1) of the Law on corporation tax provides:

‘The ultimate parent company may opt for joint taxation for those group affiliates and associations, etc., which are taxed jointly under Paragraph 31; the same shall apply for all non-Danish companies and associations, etc., in the group, in which none of the participants is personally liable for the company’s obligations, and which distributes the profits in proportion to the participants’ subscribed capital (international joint taxation). The option also covers all permanent establishments and real property situated outside Denmark belonging to those jointly taxed Danish and non-Danish companies and associations, etc. The provisions of Paragraph 31 on national joint taxation shall apply mutatis mutandis to international joint taxation, with the additions and exceptions following from (2) to (14). …’

6 Paragraph 31A(3) of that law reads as follows:

‘An option for international joint taxation shall be binding for the parent company for a period of 10 years, subject to the sixth and seventh sentences. … The ultimate parent company may opt to terminate joint taxation, which will result in full recapture of tax: see the eleventh sentence.’

The dispute in the main proceedings and the question referred for a preliminary ruling

7 Bevola has its seat in Denmark. It offers ranges of products for the manufacture of wagons and trailers for the wholesale sector. It is a subsidiary and sub-subsidiary of Danish companies that are themselves controlled by Jens W. Trock, the group’s parent company, which also has its seat in Denmark.

8 Bevola’s Finnish establishment closed in 2009. According to Bevola, the losses incurred by its establishment, DKK 2.8 million net (approximately EUR 375 000), were not and cannot be deducted in Finland following the closure.

9 In those circumstances, Bevola applied to be able to deduct those losses from its taxable income in Denmark for the tax year 2009.

10 The tax authorities rejected the application on the ground that Paragraph 8(2) of the Law on corporation tax did not allow the inclusion in taxable income of income and expenditure relating to a permanent establishment or real property situated in a foreign State, unless the company had opted for the international joint taxation scheme pursuant to Paragraph 31A of that law.

11 When the tax authorities’ refusal was confirmed by a decision of the Landsskatteretten (National Tax Appeals Commission) of 20 January 2014, Bevola and Jens W. Trock challenged that decision before the Østre Landsret (High Court of Eastern Denmark, Denmark). They argue that it would have been possible for Bevola to deduct the losses in question if they had been incurred by a Danish establishment, and that that difference in treatment constitutes a restriction of freedom of establishment within the meaning of Article 49 TFEU. The restriction, they submit, goes beyond what is necessary for maintaining the balanced allocation of powers of taxation between the Member States in a case such as Bevola’s where...