20.9.84 Official Journal of the European Communities No C 253/5 
II 
(Preparatory Acts) 
COMMISSION 
Proposal for a Council Directive on the harmonization of the laws of the Member States 
relating to tax arrangements for the carry-over of losses of undertakings 
COM(84) 404 final 
(Submitted by the Commission to the Council, on 11 September 1984) 
(84/C 253/05) 
THE COUNCIL OF THE EUROPEAN 
COMMUNITIES, 
Having regard to the Treaty establishing the 
European Economic Community, and in particular 
Article 100 thereof, 
Having regard to the proposal from the Commission, 
Having regard to the opinion of the European 
Parliament, 
Having regard to the opinion of the Economic and 
Social Committee, 
Whereas as regards taxation, the approximation of 
tax burdens on undertakings constitutes, principally 
for reasons of competition, one of the fundamental 
objectives of the Community; whereas that approxi­
mation implies, in addition to the harmonization of 
systems of company taxation and of the rates of such 
taxation, the harmonization of the rules governing 
the tax base, that is to say the rules for the determi­
nation of the taxable profits of undertakings; 
Whereas in the matter of the rules governing the tax 
base, those relating to the carry-over of losses are of 
special importance because they affect the investment 
capacity and competitiveness of undertakings; 
whereas the improvement of the position of 
Community undertakings in this regard is a high-
priority objective in the present economic situation; 
Whereas, from the technical point of view, har­
monization of the rules governing the carry-over of 
losses can be achieved immediately and independently 
of those governing other aspects of the tax base; 
Whereas, to attain the desired objective, the rules 
governing the carry-over of losses must be as liberal 
as possible; whereas in this spirit, the carry-over of 
losses from one financial year must be possible not 
only to later but also to earlier years in such a way as 
to allow undertakings to obtain a refund of tax; 
whereas no time limit would appear to be justified in 
the case of carry-forward of losses to later years but for budgetary reasons carry-back of losses to earlier 
years should be limited to the two preceding years; 
Whereas, in the case of a corporation tax system 
allowing a tax credit on distributed profits, the refund 
of taxation, in the case of the offsetting of losses 
against such profits, should be reduced by an amount 
corresponding to the credit granted so as to place an 
obligation on a State to refund a higher amount of 
taxation than it has actually collected; 
Whereas it is necessary to leave undertakings free to 
choose the order in which losses are carried over; 
whereas it is, moreover, necessary to permit them in 
the case of carry-back to previous years to limit that 
carry-back to non-distributed profits and to permit 
them to exclude from the set-off profis exempted 
from taxation or taxed at a reduced rate; 
Whereas, when different rates are applied to different 
categories of profits, it is necessary to leave to 
Member States the power to provide for the offsetting 
of losses category by category, on condition that such 
a rule does not lead to undue delay in the offsetting 
of a loss against a later profit; 
Whereas provisions regarding the carry-over of losses 
must not lead to fraud or abuse on the part of under­
takings, 
HAS ADOPTED THIS DIRECTTVE: 
Article 1 
1. The Member States shall adopt, in accordance 
with the following articles, the tax arrangements for 
the carry-over of the losses of undertakings which are 
subject to one of the taxes listed in paragraph 2, in so 
far as they draw up for tax purposes, in accordance 
with conditions laid down by national law, annual 
accounts consisting of a balance sheet and a profit 
and loss account. 
No C 253/6 Official Journal of the European Communities 20.9.84 
2. The taxes referred to in paragraph 1 are the 
following: 
— for Belgium: 
— Impot des personnes physiques — Perso-
nenbelasting, 
— Impot des societes — Vennootschapsbelasting, 
— Impot des non-residents — Belasting der niet-
verblijfhouders; 
— for Denmark: 
— Indkomstskatten til staten, 
— Selsskabsskat, 
— Den kommunale indkomstskat, 
— Den amtskommunale indkomstskat; 
— for Germany: 
— Einkommensteuer, 
— Korperschaftsteuer; 
— for France: 
— Impot sur le revenu 
— Impot sur les societes; 
— for Greece: 
— 06poc, EiaoSfinctTOc, (puaiKov jtpoacbitcflv, 
— 06poc, 6ioo8f)|i,axo5 VOHIK©V flpoari>7t(Dv, 
— 06poc;£7UTcov£Taip£i(&v; 
— for Ireland: 
— Income tax, 
— Corporation profits tax, 
— Capital gains tax; 
— for Italy: 
— Imposta sul reddito delle persone fisiche, 
— Imposta sul reddito delle persone giuridiche, 
— Imposta locale sui redditi; 
— for Luxembourg: 
— Impot sur le revenu des personnes physiques, 
— Impot sur le revenu des collectivites; 
— for the Netherlands: 
— Indkomstenbelasting, 
— Vennootschapsbelasting; 
— for the United Kingdom: 
— Income tax, 
— Corporation tax, 
— Capital gains tax; 
or any other identical or substantially similar taxes 
which are imposed in addition to, or in place of, 
those taxes. 
Article 2 
For the purposes of this Directive, profit or loss of a 
financial year shall mean the positive or negative 
results of an undertaking ascertained, after any possible set-off against other income in accordance 
with the tax rules of the State in which it is subject to 
tax, no account being taken of results recorded 
abroad by permanent establishments or subsidiaries of 
the undertaking. 
Article 3 
1. Where the result of a given financial year for an 
undertaking shows a loss, that loss shall be offset at 
the choice of the undertaking 
— either against the profits of one or of the two 
preceding financial years, or against the non-
distributed portion of those profits, 
notwithstanding the definitive nature of the 
taxation of those financial years; then, if need be, 
against the profits of the following financial years 
in chronological order; 
— or against the profits of the following financial 
years in chronological order. 
However, the undertaking may choose not to offset 
losses against profits which have not been taxed in the 
State where it is subject to tax or which have been 
taxed at a reduced rate. 
2. Where, under the provisions of paragraph 1, a 
loss has been set off against profits which have been 
distributed and which at the time of their distribution 
carried entitlement to a tax credit, the resulting 
repayment of tax shall be reduced by the amount of 
that tax credit to the extent to which it has not been 
covered by a compensatory tax. 
3. When a Member State, which applies different 
rates of taxation to different categories of profit, 
provides that losses must be set off category by 
category, it shall refrain from applying that provision 
where a loss could not be set off against profits of the 
same category at the end of the fifth financial year 
following that in which it arose. 
Article 4 
The provisions of this Directive shall not preclude the 
application of national laws for the prevention of 
fraud or abuse. 
Article 5 
Member States shall take the measures necessary to 
comply with this Directive not later than 1 January 
1986. 
They shall forthwith inform the Commission thereof. 
Article 6 
This Directive is addressed to the Member States.