Danish Permanent Establishment Legislation Found to be Unlawful

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The ECJ (European Court of Justice) has released its final ruling on legislation in Denmark regarding cross-border group tax relief stating that the law is not compatible with the European standard and rules on freedom of establishment. The ruling was not in favour of Bevola, a Danish Company claiming a tax reduction in Denmark for final losses suffered by its permanent establishment in Finland.

Denmark’s law specifying that taxable income does not include profits and losses of foreign permanent establishments have to be revised, and taxpayers in parallel situations should be entitled to reopen tax returns dating back to almost a decade in order to claim back tax repayments for final losses suffered as a result of the law.