Advocate General Collins concludes that it is not contrary to EU law that Germany refuses to offset the losses of a UK branch of W AG in Germany. The profits and losses of the establishment are exempted under the Germany – UK treaty.
The German company w AG has a branch in the United Kingdom since 2004. Since this branch does not realize a profit, it is decided to close it in 2007. As a result of the closure, the losses incurred in the UK are no longer eligible for settlement. W AG considers that the British losses should be settled in Germany, even though the income of the British establishment in Germany is exempt from tax in Germany under the Tax Treaty concluded with the UK. However, the German tax authorities refuse to offset the British losses. The German court referred questions for a preliminary ruling in this case.
Advocate General Collins concludes that it is not contrary to EU law that Germany refuses to offset the losses of a UK branch of W AG in Germany. It is important that the profits and losses of the UK establishment are exempted under a bilateral double taxation treaty between Germany and the UK.