Compensation of Losses in Foreign Subsidiaries within the EU : A Comparative Study of the Unilateral Loss-Compensation Mechanisms in Austria and Denmark

• This study commences in the problems related to the restricted possibilities for cross-border groups to take losses incurred in foreign subsidiaries into account upon taxation. These difficulties lead to the situation where the overall tax burden of the group, seen as an economic unit, might exceed its economic capacity. Such over taxation is likely to cause the cross-border group cash-flow disadvantages, liquidity problems, reduced expansion possibilities and it might also effect the organisation and location of the group’s business activities. This study has two research aims; firstly to analyse unilateral compensation of losses in foreign subsidiaries de lege lata, and secondly to analyse the consequences of different alternatives, as well as refraining from taking specific measures, upon opening up a unilateral system to cover also foreign losses de lege ferenda. In these respects, the experiences from the Austrian and Danish unilateral loss-compensation systems, under which losses incurred in foreign subsidiaries are acknowledged, serve as valuable sources of information. The findings in the study are evaluated based on the fundamental objectives that ought to be balanced from the perspective of the group as well as the loss-granting state. These objectives are; the recognition of the ability of the cross-border group, seen as an economic unit, to pay taxes; the prevention of double dip of losses, and the prevention of arbitrary as well as permanent income shifting between MS.

Ämnesord

SAMHÄLLSVETENSKAP  -- Juridik -- Juridik (hsv//swe)

SOCIAL SCIENCES  -- Law -- Law (hsv//eng)

SAMHÄLLSVETENSKAP  -- Juridik -- Juridik och samhälle (hsv//swe)

SOCIAL SCIENCES  -- Law -- Law and Society (hsv//eng)

Nyckelord

Losses

group taxation

loss relief

neutrality

single-entity approach

horizontal equity

ability to pay principle

double dip

arbitrary income shifting

permanent income shifting

Financial law

Finansrätt

European law

EU-rätt

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