Communication from the Commission to the Council, the European Parliament and the European Economic and Social - Committee Tax Treatment of Losses in Cross-Border Situations {SEC(2006) 1690}
Date: 2006-12-19
Institutions: European Commission
Subjects: corporation tax, domestic trade, financial loss, tax system, taxable income

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 19.12.2006 
COM(2006) 824 final 

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE 
EUROPEAN PARLIAMENT AND THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE 

Tax Treatment of Losses in Cross-Border Situations 

{SEC(2006) 1690} 

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1. 

CROSS-BORDER LOSS RELIEF AND THE INTERNAL MARKET 

1.1. 

Introduction 

This  Communication  is  presented  within  the  framework  of  the  Communication  on  “Co-
ordinating Member States’ direct tax systems in the Internal Market” and provides an example 
of an area which could benefit from such a co-ordinated approach.1 

The Commission is committed to improving the competitiveness of business in the European 
Union,  which  is  hampered  among  other  things  by  the  absence  of  cross-border  relief  for 
losses2. In its 2005 Communication “The contribution of taxation and customs policies to the 
Lisbon Strategy”3, action to alleviate this problem was listed as one of the targeted measures 
which could be taken in the short term to remove cross-border tax barriers faced by EU firms. 
Such action is particularly timely in the light of the recent decision of the European Court of 
Justice (ECJ) in the Marks & Spencer case4. In the absence of cross-border relief for losses, 
the  offset  of  losses  is  generally  limited  to  the  amount  of  profits  generated  in  the  Member 
States  (MS)  in  which  the  investment  is  made.  That  distorts  business  decisions  within  the 
internal market. 

This Communication5 explains the basic principles and problems regarding cross-border loss 
relief. It suggests ways in which Member States may  allow  the cross-border relief of losses 
which are sustained either:  

–  within one company (i.e. losses incurred by a branch or “permanent establishment” of the 

company situated in another Member State); or  

–  within a group of companies (i.e. losses incurred by a group member in another Member 

State).  

1.2. 

The Issue 

Although  companies  expect  to  earn  profits,  they  may  incur  losses.  Virtually  all  tax  systems 
within  the  EU  treat  profits  and  losses  asymmetrically:  profits  are  taxed  for  the  tax  year  in 
which  they  are  earned  but  the  tax  value  of  a  loss  is  not  refunded  by  the  tax  administration 
when the loss is incurred. It is thus necessary to set losses off against another positive tax base 
within the company or within the group of companies in order to avoid “overtaxation”. That 
avoids cash-flow disadvantages resulting from the time lag in the taking into account of the 
loss,  i.e.  as  a  loss  carry-forward  and  a  set-off  against  future  profits,  in  comparison  with  an 
immediate  set-off  against  another  positive  tax  base.6  Cross-border  loss  relief  would  prevent 
losses becoming stranded in different entities. 

1 
2 
3 
4 
5 

6 

COM(2006) 823 final. 
COM(2001) 582 final, “Towards an Internal Market without tax obstacles”, p. 12. 
COM(2005) 532 final, p. 8. 
Case C-446/03 Marks & Spencer [2005], not yet published. 
The  Commission  staff  working  document  SEC(2006)1690  contains  technical  annexes  with  further 
explanations and illustrations. 
In  Case  C-397/98  Metallgesellschaft  [2001]  ECR  I-1727  the  ECJ  already  held  that  cash-flow 
disadvantages, as they arise in situations where there is no immediate relief for losses, are sufficient to 
conflict with EU law.  

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A company with several domestic branch operations will in principle be automatically taxed 
on the net result, i.e. both the  profits and  the losses of these branches will be automatically 
and immediately taken into account. In most other situations, relief for losses is possible only 
where authorised by a specific provision adopted by the respective Member States. 

Domestic relief of losses  Cross-border relief of losses

Within one company 
(“permanent establishment”) 

Automatically available 

Available in most cases  

Within a group of companies 
(“parent” and “subsidiary”) 

Available under specific 
rules in most MS 

In principle not available, 
with very few exceptions 

1.3. 

The Internal Market and Impact on Business Decisions 

Different treatment of cross-border losses by Member States has an impact on the functioning 
of the internal market. Cross-border loss relief issues influence business decisions on whether 
and how to enter a new market. The lack (or limitation) of cross-border loss relief creates a 
barrier to entering other markets, which perpetuates the artificial segmentation of the internal 
market along national lines.  

As a result, companies in large Member States, which are able to achieve greater economies 
of  scope  and  scale  within  their  own  national  market,  have  an  advantage  over  potential 
competitors  from  smaller  Member  States,  even  where  the  latter  are  more  innovative  and 
efficient.  Larger  companies  will  normally  have  more  activities  in  different  Member  States 
than  smaller  companies,  which  will  ensure  that  larger  companies  can  absorb  losses  more 
easily. Similarly, Member States with larger domestic markets have an advantage because it is 
more likely that companies already have investments in these markets, and thus are able to set 
any  loss  from  particular  activities  against  the  positive  tax  base  of  others.  The  issue  is  of 
particular  relevance  to  SMEs  with  respect  to  start-up  losses  arising  from  new  investments 
abroad.7 The lack or limited availability of cross-border loss relief therefore:  
–  favours  domestic  investments  and  acts  as  a  disincentive  to  investments  in  other  Member 

States; 

–  favours cross-border investment in larger Member States; 

–  favours  large  companies  in  comparison  with  SMEs  when  it  comes  to  cross-border 

investments; and 

–  influences  the  choice  between  a  permanent  establishment  and  a  subsidiary  as  a  form  of 

establishment. 

These  distortions  lead  to  higher  prices  for  both  businesses  and  consumers  and  to  a 
concomitant  welfare  loss.  Where  the  limited  availability  of  loss  relief  leads  to  less 
competition within the markets of a Member State the dominant companies will suffer in the 
long  term  because  there  is  less  intense  pressure  on  them  to  innovate  and  become  more 
efficient.  

7 

The particular difficulties faced by SMEs in relation to cross-border economic activity (lack of cross-
border loss relief and high compliance cost) are addressed in the Commission’s Communication on a 
Home State Taxation Pilot Scheme (COM(2005) 702 final). 

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1.4. 

Cross-Border Loss Relief and the Case Law of the ECJ 

The ECJ has dealt with cross-border loss offset involving permanent establishments in the 
Futura8 and AMID9 cases.  

In  Futura,  the  Court  looked  at  the  situation  from  the  perspective  of  the  host  State  of  the 
permanent  establishment,  finding  that  the  territoriality  principle  could  justify  limiting  the 
amount of loss  carry-forward available in that State to the losses that  had an economic link 
with income earned there.  

In  AMID,  adopting  a  home  State  perspective,  the  Court  found  that  the  exemption  from 
taxation  of  Luxembourg  permanent  establishment  profits  under  Belgium’s  double  tax 
agreement  (DTA)  with  that  country  did  not  establish,  in  respect  of  loss  relief,  an  objective 
difference  between  the  situation  of  a  Belgian  company  with  a  permanent  establishment  in 
Luxembourg and that of a Belgian company with an establishment (branch) in Belgium.10 In 
the  absence  of  justification,  different  treatment  of  those  two  companies  as  regards  the 
deduction of losses was contrary to the freedom of establishment and could not be accepted.11  

The issue of cross-border loss relief between companies was the subject of an ECJ decision 
for the first time in the Marks & Spencer case. It was claimed that the refusal to allow the UK 
parent to set off against its profits the losses of its foreign EU subsidiaries which did not carry 
on business in the UK infringed the freedom of establishment provided for by the EC Treaty. 
Trading  losses  had  eventually  led  to  the  complete  cessation  of  the  activities  of  most  of  the 
subsidiaries.  

The  UK  put  forward  several  justifications  for  this  restriction:  (a)  the  need  for  a  balanced 
allocation of taxing powers between the Member States, (b) the need to prevent losses from 
being taking into account twice, and (c) the risk of tax avoidance. The ECJ accepted that these 
three  factors, 
the  freedom  of 
establishment12.  However,  it  found  that  the  UK  group  relief  scheme  did  not  respect  the 
principle of proportionality where the possibilities for having the losses taken into account in 
the subsidiary’s State of residence had been exhausted. 

justify  provisions  restricting 

together,  could 

taken 

2. 

LOSSES WITHIN ONE COMPANY – THE ISSUE OF LOSSES INCURRED BY PERMANENT 
ESTABLISHMENTS 

Losses within a company may be defined as losses incurred by dependent parts of a company, 
e.g. separate departments, branches or permanent establishments. 

2.1. 

Tax Treatment of Losses in Domestic Situations  

Relief  for  losses  arising  in  domestic  operations  within  a  single  company  is  automatically 
granted in all Member States ensuring that losses within the company are immediately taken 
into  account.  Since  the  company  will  be  taxed  on  the  net  result  of  all  domestic  branch 

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Case C-250/95 Futura [1997] I-2492. 
Case C-141/99 AMID [2000] I-11621. 
Case C-141/99 AMID [2000] I-11621, paras 28 and 29. 
Ibid, paras 30 and 31. 
Case C-446/03 Marks & Spencer [2005] para 51. 

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activities,  the  relief  will  be  automatically  recaptured  where  the  loss-making  part  of  the 
company returns to profit. 

2.2. 

Tax Treatment of Losses in Cross-Border Situations 

The  company  will  usually  be  taxed,  as  a  non-resident,  on  the  results  of  the  permanent 
establishment  in  the  Member  State  in  which  the  permanent  establishment  is  situated.  Under 
EC law, the permanent establishment must be granted the same treatment under national law 
as resident entities: for example, loss carry-forward or carry-back.13  

The  results  of  the  permanent  establishment  then  form  part  of  the  overall  results  of  the 
company in the Member State of the head office. DTAs normally give the host Member State 
the primary taxing rights for the profits of the permanent establishment. The Member State of 
the head office will usually have only secondary taxing rights to those profits. The Member 
State  choice  of  technique  for  eliminating  double  taxation  depends  on  which  of  the  two 
methods  outlined  in  Art. 23  of  the  OECD  Model  Convention  (the  credit  method  or  the 
exemption method) has been adopted in DTAs with other Member States. 

a) 

Credit Method 

The credit method takes worldwide income into account in the company’s State of residence. 
Taxes paid abroad are credited against the part of the domestic tax levied on the income taxed 
abroad.  The  credit  method  therefore  works  in  a  similar  way  to  the  treatment  of  losses  of 
domestic  establishments.  Any  loss  will  be  taken  into  account  when  determining  worldwide 
income. 

b) 

Exemption Method … 

The  exemption  method  generally  excludes  foreign income taxed in the source country from 
the tax base of the head office. 

(1) 

… without loss deduction 

Since results of a permanent establishment are not taken into account at the level of the head 
office, no loss relief is available. This approach is applied by seven Member States.  

(2) 

… with (temporary) loss deduction 

At  present,  five  Member  States  provide  for  a  deduction  of  losses  sustained  by  permanent 
establishments situated in another Member State, although profits are exempted. These losses 
are recaptured once the permanent establishment returns to profitability (thereby ensuring tax 
cohesion). 

2.3. 

Freedom of Establishment and Losses within one Company 

Where  losses  incurred  by  permanent  establishments  may  not  be  set  off  against  profits  of  a 
head office (“vertical upward” set-off), there will be a difference in treatment in comparison 
with  a  purely  domestic  situation.  This  makes  it  less  attractive  to  exercise  freedom  of 
establishment  and  a  company  may  refrain  from  setting  up  a  permanent  establishment  in 

13 

E.g. Case C-311/97 Royal Bank of Scotland [1999] ECR I-2651. 

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another Member State. Such a difference in treatment constitutes an obstacle to the freedom 
of establishment which is prohibited by Article 43 EC. The ECJ explicitly stated in AMID that 
the situation of a company with a permanent establishment abroad is in a comparable situation 
to that of a company without one.14  

The need to prevent losses being taken into account twice may be addressed by a recapture 
mechanism.  Whereas  in  domestic  situations  loss  recapture  occurs  automatically,  in  cross-
border situations such a recapture mechanism has to be provided for expressly. The fact that 
five Member States already do so shows that a system with loss deduction and recapture from 
future profits is feasible.  

The risk of tax avoidance is very limited for the losses incurred by a permanent establishment, 
since losses are taken into account only at the level of the head office (“vertical upward” set-
off).  

3. 

LOSSES  WITHIN  A  GROUP  OF  COMPANIES  –  THE  ISSUE  OF  LOSSES  INCURRED  BY 
FOREIGN SUBSIDIARIES 

3.1. 

The Rationale for Loss Relief within a Group of Companies 

Companies  which  have  legal  personality  under  civil  law  are  generally  subject  to  corporate 
income tax in all Member States. The incorporation of an activity results in a separate entity, 
not only from a legal, but also from a tax point of view. A group of companies does not have 
legal personality under corporate law; nor is such a group recognised as a single taxable entity 
in  its  own  right.  Therefore,  within  a  group  of  companies,  losses  are  not  taken  into  account 
automatically  in  the  way  they  are  within  a  company.  However,  from  an  economic  point  of 
view, a group of companies can be regarded as a single economic unit. Many Member States 
have  introduced  a  domestic  system  for  group  taxation  in  order  to  treat  a  group  as  a  single 
economic unit. However, only a limited, albeit increasing number of Member States have loss 
relief systems that also apply to cross-border situations.15  

The lack of a domestic group taxation scheme distorts investment decisions mainly regarding 
the  legal  form  of  the  investment  (it  favours  the  establishment  of  a  branch  rather  than  a 
subsidiary),  but  not  decisions  regarding  the  location  of  the  investment.  The  lack  of  cross-
border  loss  relief  for  groups  of  companies,  however,  can  also  distort  business  decisions  as 
regards both the legal form and the location of investment. 

3.2. 

Domestic Relief for Losses within a Group of Companies 

Six  Member  States  do  not  provide  for  a  domestic  system  of  group  taxation.  The  schemes 
applied by the other nineteen Member States may be broadly classified in the following three 
categories: 

(a) 

(b) 

(c) 

14 
15 

system of “intra-group loss transfer” (seven Member States); 

“pooling” of tax results of a group (eleven Member States); or 

full tax consolidation (one Member State). 

Case C-141/99 AMID [2000] I-11621, para 25 ff. 
Denmark  and  France  have  applied  such  schemes  for  many  years.  Italy  and  Austria  have  introduced 
them as of 2004 and 2005. 

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The term “intra-group loss transfer” covers both “group relief” and the “intra-group contribu-
tion”. Both these types of system allow a definitive transfer of income between companies in 
order  to  relieve  losses  against  profits  within  a  group.  Under  a  “group  relief”  system  a  loss 
from one group member can be transferred (or “surrendered”) to a profitable group member. 
Under an “intra-group contribution” system the profits from one group member can be trans-
ferred  to  a  loss-making  group  member.  To  the  extent  that  the  “intra-group  contribution” 
system  is  used  to  eliminate losses, it therefore has the same economic effect as a  system of 
“intra-group loss transfer”.  

A  “pooling”  system  involves  aggregating  all  individual  tax  results  (i.e.  profits  and  losses) 
from  the  members  of  a  group  at  the  level  of  the  parent  company.  This  “pooling”  is  not 
necessarily linked to the existence of losses although this will be the main reason for applying 
such a system. “Full tax consolidation” goes beyond a pooling system, since for tax purposes 
the legal personality of the group members and any intra-group transactions are disregarded. 
The results of the group are determined on the basis of a single profit and loss account. 

When  applied  domestically,  all  methods  provide  for  full  vertical  upward/downward  (i.e. 
between  parent  and  subsidiary)  and  horizontal  (i.e.  between  subsidiaries)  loss  compensation 
within a group. This means that if the group shows an overall net loss, the profits of individual 
members  of  the  group  will  not  be  subjected  to  tax,  but  will  be  set  off  against  the  losses  of 
other  group  members.  All  methods  have  the  effect  of  providing  immediate  relief  by 
preventing losses being stranded in different entities. Owing to automatic recapture, the relief 
is generally temporary, until the loss-making subsidiary becomes profitable again. The relief 
is permanent only where the losses are terminal. 

Simply  extending  regimes  applicable  in  domestic  situations  to  cross-border  situations, 
although representing an improvement over the current situation, would not produce an ideal 
solution. In domestic situations recapture of the losses is automatic: extending such a scheme 
to cross-border situations therefore needs an explicit mechanism for recapture. It could also be 
technically difficult to extend all aspects of a domestic system for loss relief to a cross-border 
situation. All Member States with a system for cross-border loss relief apply different rules in 
cross-border and domestic situations.  

3.3. 

Defining the Scope of a Targeted Measure  

3.3.1.  Demarcation vis-à-vis a Common Consolidated Corporate Tax Base (CCCTB) 

Any targeted measure to introduce cross-border loss relief represents an intermediate solution 
pending  the  adoption  of  a  CCCTB.  It  would  be  easier  to  develop  and  implement  but 
necessarily  narrower  in  scope  than  an  EU-wide  CCCTB.  It  would  not  require  any 
harmonisation  of  tax  systems  or  the  tax  base.  Unlike  the  CCCTB,  which  is  based  on  a 
“multilateral”  or  “common”  approach,  a  targeted  measure  could  theoretically  be  designed 
only  to  require  implementation  and  operation  by  one  Member  State  (“unilaterally”). 
Nevertheless,  coordinated  action  by  the  home  country  and  the  foreign  investment  country 
would be the most appropriate approach. 

3.3.2.  The implications of the judgment in Case C-446/03 Marks & Spencer 

The following principles and guidelines may be deduced from the judgment: first, in order to 
protect  a  balanced  allocation  of taxing powers, the State of  the parent company would only 
grant  permanent  loss  relief  in  the  case  of  terminal  losses.  Second,  the  need  to  prevent 
companies  from  taking  losses  into  account  twice  can  be  addressed  by  making  relief 

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conditional  upon  the  subsidiary  having  exhausted  the  immediate  possibilities  for  loss  relief 
available in its Member State of residence. Third, the risk of tax avoidance increases when a 
group  of  companies  is  free  to  determine  when  and  where  it  wishes  to  have  its  losses  (and 
profits)  taken  into  account  for  tax  purposes.  This  problem  is  greater  the  more  choice  a 
company has in offsetting its losses horizontally or vertically downwards. Companies would 
naturally tend to allocate the loss to companies where the tax value is the highest.  

The  Commission  believes  that  these  concerns  can  largely  be  met  by  limiting  cross-border 
relief  to  vertical  upward  situations.  Combined  with  a  recapture  provision  and  a  requirement 
that any relief currently available to the subsidiary be used first, that would minimise the risk 
of tax avoidance.  

3.3.3.  Conceptual Framework – Guiding Principles for a Targeted Measure 

A  targeted  measure  addressing  cross-border  loss  relief  should  ensure  that  corporate  groups 
doing  business  in  several  Member  States  are  treated  as  far  as  possible  in  the  same  way  as 
groups doing business with a single Member State. In particular, it should allow losses to be 
set off from the tax base for the year in which they are incurred. A targeted measure should 
thus:  

(a) 

(b) 

(c) 

(d) 

(e) 

permit an effective and immediate, once-only deduction of losses; 

allow,  as  a  minimum,  losses  to  be  taken  into  account  at  the  level  of  the  parent 
company (“vertical upward” set-off); 

not normally result in a definite shift of income from one Member State to another, 
unless the losses are terminal and there is no possibility for relief in the State where 
such losses were incurred; 

exhaust domestic possibilities for current loss relief first; and 

not offer scope for abuse. 

3.4. 

Alternatives for Cross-Border Loss Relief  

In theory, there are three possible alternatives which provide for such a minimum level of loss 
compensation. These alternatives do not differ as regards the taking into account of the losses, 
but do differ with regard to their treatment of future profits of the subsidiary at the level of the 
parent company: 

Tax year of loss 

Deduction of loss in the year of loss 

Subsequent tax 
year(s) 

Alternative 1 

Alternative 2 

Alternative 3 

definitive loss 
transfer 

temporary loss 
transfer 

current taxation of 
subsidiary’s results  

future profits are not 
taken into account 

recapture of 
deducted loss 

taking into account of 
results of loss-making 
entity for a certain period 

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3.4.1.  Alternative 1: Definitive loss transfer (“intra-group loss transfer”) 

This scheme would lead to a definitive transfer of losses (within a “group relief” scheme, as 
was  the  case  in  Marks  &  Spencer)  or  profits  (within  an  “intra-group  contribution”  scheme) 
without  recapture,  unless  counterbalancing  measures  were  introduced.  One  way  of 
neutralising the effect on the revenue of the Member State in which a loss-absorbing company 
is resident would be to introduce a clearing system so that the Member State of the company 
surrendering the loss would compensate the Member State of the company absorbing the loss. 
The system would need to take account of any significant differences between applicable tax 
rates and tax accounting rules. Special attention would also have to be given to tax planning 
issues.  

3.4.2.  Alternative 2: Temporary loss transfer (“deduction/reintegration method”) 

Under  this  scheme  a  loss  incurred  by  a  subsidiary  situated  in  another  Member  State,  which 
was  deducted  from  the  results  of  the  parent  company,  is  subsequently  recaptured  once  the 
subsidiary returns to profitability. This results in a temporary transfer of losses. This was the 
approach chosen in the 1990 proposal for a Directive.16 

The  advantage  of  this  method  is  that  it  is  relatively  easy  to  operate.  First,  the  losses  are 
deducted,  and  later,  when  the  subsidiary  returns  to  profit,  the  loss  previously  deducted  is 
recaptured through a corresponding additional tax burden at the level of the parent company. 
This mechanism should therefore allow immediate, temporary relief at the level of the parent 
company, thereby avoiding the cash-flow disadvantages which would otherwise occur.  

3.4.3.  Alternative 3:  Current  taxation  of  subsidiary’s  results  (“system  of  consolidated 

profits”) 

Under this system, the profits and losses for a given tax year of selected or all group members 
are  taken  into  account  over  a  certain  time  period  at  the  level  of  the  parent  company. 
Consolidated subsidiaries would be treated in the same manner as permanent establishments. 
The credit method would be applied to eliminate double taxation. Tax paid by a subsidiary in 
its  State  of  residence  would  be  credited  against  the  tax  payable  in  the  Member  State  of  the 
parent  company  in  respect  of  income  from  the  subsidiary.  Profit  distributions  between  the 
group members would not be taken into account.  

The application of such a scheme is not linked or limited to the existence of losses (although 
this will be the main reason for its application). Therefore, once a subsidiary has been elected 
to participate in such a scheme, it will normally be applied for a certain period, e.g. 3, 5 or 
more years. 

A system of consolidated profits may be designed to comprise either:  

–  one or more subsidiaries selected at the taxpayer’s discretion – a selective scheme, or 

–  all subsidiaries of a group – a comprehensive scheme. 

16 

COM(90) 595 final. Proposal withdrawn OJ C 5, 9.1.2004, p. 20. 

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Of  the  two  schemes,  a  selective  scheme  would  require  less  documentation  but  could  be 
vulnerable to aggressive tax planning techniques involving concentrating cost in subsidiaries 
chosen  for  consolidation.  Under  the  comprehensive  scheme  the  overall  financial  position  of 
the  group  will  be  subject  to  taxation  in  the  State  of  residence  of  the  parent  company.  The 
credit method will help eliminate opportunities for tax arbitration based on the calculation of 
the tax base and tax rates. The main disadvantage would be an increased compliance cost due 
to  the  need  to  recalculate  the  income  of  all  group  members  under  the  rules  of  the  parent 
company’s Member State.17 

4. 

CONCLUSION 

The  Commission  stresses  the  need  for  effective  systems  to  provide  cross-border  loss  relief 
within  the  EU.  The  limited  availability  of  cross-border  loss  relief  is  one  of  the  most 
significant  obstacles  to  cross-border  business  activity  and  an  effective  internal  market. 
Introducing  systems  for  cross-border  loss  relief  will  particularly  benefit  SMEs,  which 
currently  suffer  from  the  lack  of  such  relief.  It  will  also  remove  a  major  impediment  to  the 
emergence of more competitive EU firms on the world market. 

Losses within a company 

Where  Member  States  do  not  allow  losses  incurred  by  permanent  establishments  in  other 
Member State to be taken into account, the Commission strongly encourages these Member 
States to review their tax systems in order to promote the freedom of establishment provided 
for by the EC Treaty. 

Losses within a group of companies 

The Commission encourages Member States to introduce and maintain domestic tax systems 
for loss relief within a group of companies that offer treatment equivalent to that provided for 
loss  relief  within  a  single  company.  This  would  eliminate  distortions  and  enhance  the 
attractiveness of the country in question as an investment location and thereby help to meet 
the objectives of the Lisbon Strategy. 

The  Commission  stresses  the  need  to  make  cross-border  loss  relief  within  a  group  of 
companies more widely available, for the development of businesses across the single market 
and worldwide.  

This Communication presents three possible approaches for offering cross-border loss relief. 
The response should be coordinated in order to maximise the benefits for the internal market 
and reduce unnecessary duplication of effort in the 25 Member States.  

17 

For SME-groups, the Home State Taxation could solve the major disadvantages.  

EN 

10 

   EN 

 
                                                 
The  Commission  invites  the  Council,  the  European  Parliament  and  the  European  Economic 
and Social Committee to examine the proposals set out in this Communication with a view to 
urging Member States to:  

•  review existing national systems in order to provide relief for losses within a company in 

cross-border situations; 

•  rapidly implement one or more of the possible solutions presented in this Communication 

for the treatment of losses incurred within groups of companies; and 

•  consider how the suggestions in this Communication can be applied to both domestic and 
cross-border situations by improving existing loss relief schemes and by introducing new 
ones. 

--------------------- 

EN 

11 

   EN