The Compatibility of the Danish Joint Taxation Rules with EU Law: Deduction of Final Losses in Danish CTA Section 31 (E) from an EU Perspective

Frederik Rudebeck Rasmussen

Student thesis: Master thesis


The purpose with this thesis is to investigate whether the Danish Corporate Tax Act (CTA) is in conformity with EU law and its developed Marks & Spencer-doctrine regarding the deduction of cross-border finally lost deficits. The territorial principle in CTA section 8 (2) cause that Danish companies cannot claim a deduction for losses incurred in foreign permanent establishments (PE) and subsidiaries. Danish subsidiaries and PE, that are part of a group, are locked to mandatory joint taxation according to section 31. Danish companies get opportunity to choose international joint taxation according to section 31 (A), which means all foreign entities must be included in join taxation and that lead to a binding period of 10 years. A review of the European Court of Justice (ECJ) in the form of C-446/03 Marks & Spencer, C-650/16 Bevola, C-607/17 Memira, C-608/17 Holmen states that it is a restriction if a member state’s legislation permits the parent company’s deduction of cross-border deficits from secondary establishments located in other Member States. However, it is allowed to refuse deduction of losses when the parent company cannot prove that the deficit is final. According to the case law of ECJ, if all possibilities for utilizing the deficit in the other Member State have been exhausted, a deficit can be considered final. The deficit is also final if it is impossible to utilize the deficit in the future and that a third party does not have or cannot take the deficit into account. In the Bevola case, the provisions mentioned above were not in conformity with the EU law, as they do not allow companies to claim deductions for cross-border deficits. The inability to claim deductions for final deficits is not in line with the Marks & Spencer doctrine. As a follow-up on the decision, the Ministry of Taxation submitted a bill, which CTA section 31 (E) is introduced. This was passed in 2020. CTA 31 (E) must give Danish companies the opportunity to claim a deduction of cross-border final deficits. The analysis of CTA 31 (E) forms an understanding of what the provision entails and what impacts it will have. Based on the analysis, a discussion about the compatibility of the provision with EU case law has been made. This thesis concludes that CTA 31 (E) is in its current form more burdensome than the Marks & Spencer doctrine, which means that the provision most likely does not bring the Danish rules in conformity with the EU law.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2022
Number of pages87
SupervisorsPeter Koerver Schmidt