Marios Palesis
Partner – Tax Department

Stelios Lympouras
Officer – Tax Department


The Finanzamt B v. W AG - C-538/20 is a court case dealing with the non-allowance of deduction of final losses of UK permanent establishment (“PE”) at the level is the German Parent company. The taxpayer (W AG) claimed that this is an infringement of freedom of establishment and applied to CJEU for a ruling.

In this publication, we shall present the facts of the case in a short summary as well as the CJEU judgement.



W AG is a company tax resident in the German having a PE in the UK. The PE closed during 2007 and the loss of the PE were claimed as a deduction by W AG the company’s tax return for 2007.

The German tax authorities disallowed the deduction of the final losses on the grounds that the UK- Germany Double Tax Agreement (“DTA) exempted from taxation the PE profits in the country of residence of the company and as such the losses are also exempt from relief.

W AG constructed its case to oppose such decision based on the reasoning that the DTA violates the freedom of establishment.

In this respect the CJEU was called to rule based on another ruling relating to final losses in the Bevola and Jens W. Trock (C-650/16).



CJEU stated in its ruling that, Finanzamt B v. W AG - C-538/20 is not a case comparable to Bevola and Jens W. Trock (C-650/16) as in the first case the country of residence of the company waived its right to tax the profits (or losses) of the foreign PE under the provisions of UK-Germany DTA where the second case related to a domestic company- PE relationship where Denmark waived is taxing right on profits and relief of losses incurred in another Member stated on a unilateral basis.


Based on the above CJEU concluded no infringement of freedom of establishment took place and added that the European Law does not require that final losses of a foreign PE to be deducted at the level of parent entity.


This publication has been prepared as a general guide and for information purposes only. It is not a substitution for professional advice. One must not rely on it without receiving independent advice based on the particular facts of his/her own case.  No responsibility can be accepted by the authors or the publishers for any loss occasioned by acting or refraining from acting on the basis of this publication.


October 2022


Marios Palesis
Partner – Tax Department


Stelios Lympouras
Officer – Tax Department



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