A/S Bevola and Jens W. Trock ApS v Skatteministeriet.
Date: 2018-06-12
15


Freedom of establishment, which Article 49 TFEU grants to EU nationals, includes, in accordance with Article 54 TFEU, for companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the European Union, the right to exercise their activity in other Member States through a subsidiary, branch or agency.
16


Even though, according to their wording, the provisions of EU law on freedom of establishment are aimed at ensuring that foreign nationals are treated in the host Member State in the same way as nationals of that State, they also prohibit the Member State of origin from hindering the establishment in another Member State of one of its nationals or of a company incorporated under its legislation (judgment of 23 November 2017, A, C‑292/16, EU:C:2017:888, paragraph 24).
17


Those considerations also apply where a company established in one Member State carries on business in another Member State through a permanent establishment (judgment of 15 May 2008, Lidl Belgium, C‑414/06, EU:C:2008:278, paragraph 20).
18


As the Court has previously held, a provision which allows losses incurred by a permanent establishment to be taken into account in calculating the taxable profits of the company to which the establishment belongs constitutes a tax advantage (see, to that effect, judgment of 15 May 2008, Lidl Belgium, C‑414/06, EU:C:2008:278, paragraph 23).
19


Granting such an advantage where the losses are incurred by a permanent establishment situated in the Member State of the resident company, but not where the losses are incurred by a permanent establishment in a Member State other than that of the resident company, has the consequence that the tax situation of a resident company possessing a permanent establishment in another Member State is less favourable than it would be if the permanent establishment were in the same Member State as the resident company. By reason of that difference in treatment, a resident company could be discouraged from carrying on its business through a permanent establishment situated in another Member State (see, to that effect, judgment of 15 May 2008, Lidl Belgium, C‑414/06, EU:C:2008:278, paragraphs 24 and 25).
20


However, a difference in treatment deriving from the tax legislation of a Member State to the detriment of companies making use of their freedom of establishment does not constitute a restriction of that freedom if it concerns situations which are not objectively comparable, or if it is justified by an overriding reason in the public interest proportionate to that objective (see to that effect, judgment of 25 February 2010, X Holding, C‑337/08, EU:C:2010:89, paragraph 20).
32


On this point, it should be recalled that, according to the case-law of the Court, the comparability of a cross-border situation with an internal situation must be examined having regard to the aim pursued by the national provisions at issue (judgments of 18 July 2007, Oy AA, C‑231/05, EU:C:2007:439, paragraph 38; of 25 February 2010, X Holding, C‑337/08, EU:C:2010:89, paragraph 22; and of 12 June 2014, SCA Group Holding and Others, C‑39/13 to C‑41/13, EU:C:2014:1758, paragraph 28).
33


Contrary to the Commission’s argument, the judgments of 17 July 2014, Nordea Bank Danmark (C‑48/13, EU:C:2014:2087), and of 17 December 2015, Timac Agro Deutschland (C‑388/14, EU:C:2015:829), do not imply the abandonment by the Court of that method of assessing the comparability of the situations, which is moreover expressly applied in later judgments (judgments of 21 December 2016, Masco Denmark and Daxima, C‑593/14, EU:C:2016:984, paragraph 29; of 22 June 2017, Bechtel, C‑20/16, EU:C:2017:488, paragraph 53; and of 22 February 2018, X and X, C‑398/16 and C‑399/16, EU:C:2018:110, paragraph 33).
34


In the judgments of 17 July 2014, Nordea Bank Danmark (C‑48/13, EU:C:2014:2087), and of 17 December 2015, Timac Agro Deutschland (C‑388/14, EU:C:2015:829), the Court merely considered that there was no need for it to look at the purpose of the national provisions concerned, since they applied the same tax treatment to permanent establishments abroad and those in national territory. Where the legislature of a Member State treats those two categories of establishments in the same way for the purpose of taxing their profits, it recognises that, with regard to the detailed rules and conditions of that taxation, there is no objective difference between their situations which could justify a difference in treatment (see, to that effect, judgment of 28 January 1986, Commission v France, 270/83, EU:C:1986:37, paragraph 20).
35


The judgments of 17 July 2014, Nordea Bank Danmark (C‑48/13, EU:C:2014:2087), and of 17 December 2015, Timac Agro Deutschland (C‑388/14, EU:C:2015:829), cannot be understood, however, as meaning that, where national tax legislation treats two situations differently, they cannot be regarded as comparable. The Court held that the application of different tax rules to a resident company depending on whether it has a resident permanent establishment or a non-resident permanent establishment cannot be a valid criterion for assessing the objective comparability of the situations (see, to that effect, judgment of 22 January 2009, STEKO Industriemontage, C‑377/07, EU:C:2009:29, paragraph 33). Moreover, to accept that a Member State may in all cases apply different treatment solely because the permanent establishment of a resident company is situated in another Member State would deprive Article 49 TFEU of its substance (see, to that effect, judgment of 25 February 2010, X Holding, C‑337/08, EU:C:2010:89, paragraph 23). Consequently, the comparability of the situations must be assessed with regard to the purpose of the national provisions at issue, in accordance with the case-law cited in paragraphs 32 and 33 above.
37


The Court has held that, as regards measures laid down by a Member State in order to prevent or mitigate the double taxation of a resident company’s profits, companies which have a permanent establishment in another Member State are not, in principle, in a comparable situation to that of companies possessing a resident permanent establishment (see, to that effect, judgments of 17 July 2014, Nordea Bank Danmark, C‑48/13, EU:C:2014:2087, paragraph 24, and of 17 December 2015, Timac Agro Deutschland, C‑388/14, EU:C:2015:829, paragraph 27).
38


However, as regards losses attributable to a non-resident permanent establishment which has ceased activity and whose losses could not, and no longer can, be deducted from its taxable profits in the Member State in which it carried on its activity, the situation of a resident company possessing such an establishment is not different from that of a resident company possessing a resident permanent establishment, from the point of view of the objective of preventing double deduction of the losses.
42


In this respect, it must be recalled that the preservation of the allocation of the power to impose taxes between Member States may make it necessary to apply to the economic activities of companies established in one of those States only the tax rules of that State in respect of both profits and losses (judgment of 25 February 2010, X Holding, C‑337/08, EU:C:2010:89, paragraph 28).
43


In the present case, if the Kingdom of Denmark granted resident companies the right to deduct losses deriving from their permanent establishments situated in other Member States, whether in Denmark or in the Member State where the permanent establishment is located, even if they had not opted for international joint taxation, that would seriously undermine a balanced allocation of powers of taxation between Member States, since the tax base would be increased in one Member State and reduced in the other, depending on the company’s choice (see, to that effect, judgment of 25 February 2010, X Holding, C‑337/08, EU:C:2010:89, paragraph 29 and the case-law cited).
45


In this respect, the Court has previously accepted that the need to maintain the coherence of a tax system may justify a restriction of the exercise of the freedoms of movement guaranteed by the FEU Treaty. However, in order for such a justification to be accepted, a direct link must be established between the tax advantage concerned and the offsetting of that advantage by a particular tax levy, the direct nature of that link falling to be examined in the light of the objective pursued by the legislation in question (judgment of 30 June 2016, Max-Heinz Feilen, C‑123/15, EU:C:2016:496, paragraph 30 and the case-law cited).
52


Furthermore, the prevention of the risk of the double use of losses, while not expressly relied on by the Danish Government, is also capable of justifying a restriction of freedom of establishment such as that at issue in the present case (see, to that effect, judgment of 3 February 2015, Commission v United Kingdom, C‑172/13, EU:C:2015:50, paragraph 24).
56


It should be stressed that, if a resident company were free to define the extent to which that joint taxation was applied, it would be able to decide at will to incorporate only non-resident permanent establishments facing losses, which would then be deducted from its taxable income in Denmark, while excluding establishments making profits and subject in their own Member State to a rate of tax that might be more favourable than in Denmark. Similarly, the possibility which would be left to the resident company of altering the extent of international joint taxation from one year to the next would be tantamount to allowing it to choose freely the Member State in which the losses of the non-resident permanent establishment in question were to be taken into account (see, to that effect, judgment of 25 February 2010, X Holding, C‑337/08, EU:C:2010:89, paragraphs 31 and 32). Such possibilities would jeopardise both the balanced allocation of powers of taxation between Member States and the symmetry between the right to tax profits and the possibility of deducting losses sought by the Danish tax system.
60


However, in order not to compromise the coherence of the Danish tax system, the maintenance of which was one of the reasons for the adoption of the legislation in question, deduction of such losses can be allowed only on condition that the resident company demonstrates that the losses it wishes to set off against its results are definitive (see, to that effect, judgments of 13 December 2005, Marks & Spencer, C‑446/03, EU:C:2005:763, paragraph 56, and of 3 February 2015, Commission v United Kingdom, C‑172/13, EU:C:2015:50, paragraph 27).