On 17 October 2019, the Advocate General (AG) opined2 that the freedom of establishment does not oblige a host member state to allow tax relief for losses incurred by a company in another (home) member state before it transferred its place of management (PoM) to the host state.

In this particular case the company incurred losses whilst resident in the Netherlands. It then transferred its PoM to the Czech Republic, and as it could no longer use the losses in the Netherlands it sought to set them against its subsequent profits arising in the Czech Republic. The claim was disallowed by the Czech tax authorities.

The AG opined that, although the freedom of establishment allowed a transfer of PoM from one state to another, the restriction of the use of losses in this case was justified on the basis of the balanced allocation of taxing powers. The denial of the relief was consistent with the principles of territoriality, autonomy and symmetry, and was proportionate.

The AG’s opinion can be viewed here.